“For better or worse, your FICO score is the one number creditors pay attention to most,” said Karen Smith, Vice President and Chief Credit Officer at BluPeak Credit Union. “Fortunately, proving your creditworthiness rests largely on making common sense financial decisions."
SAN DIEGO, Calif. (PRWEB) December 28, 2022
With the average American’s credit score at an all-time high, it might seem like our days of making financial missteps are behind us. But with more than one in 10 Americans still living below the poverty line, that means many among us remain in serious need of money and may make decisions under that type of distress that ruins our credit record.
“For better or worse, your FICO score is the one number creditors pay attention to most,” said Karen Smith, Vice President and Chief Credit Officer at BluPeak Credit Union. “Fortunately, proving your creditworthiness rests largely on using common sense when it comes to making certain financial decisions. This includes paying your bills on time, not overspending, and avoiding running up a balance that maxes out your credit limits.”
What Can Damage Your Credit Score?
Your credit score is a bit of a moving target. It can change frequently based on things you do – or don’t do – so it’s important to stay vigilant about managing your finances responsibly. Here are some of the most damaging things a person can do to sink their credit scores:
Defaulting on a Loan. This is one of the worst financial moves out there, and can haunt your credit history for years. If you ever get into financial trouble and have difficulty making payments, don’t just ignore the problem and stop paying. Instead, reach out to your lender right away to work out a payment plan to get you through the rough spot.
Making Late Payments. Another big no-no is being late with your payments or missing payments. Remember, lenders want to see a record of responsible financial management. One way to ensure you’re never late is to set up automatic payments through online banking.
Maxing Out Credit Limits. When analyzing your credit history, one of the things credit reporting agencies look at is credit utilization. Basically, they want to see that you’re using credit, but not every dollar that’s available to you. This is a case where less is definitely better than more.
Closing Credit Accounts. This is the flip side of maxing out credit. When you close a credit account, you’re removing what could be a positive, long-term history that counts in your favor. You’re also reducing your available credit. So even if your balances stay the same, your credit score will take a hit, because your credit utilization is higher. That means it’s a usually good idea to keep accounts active, even if you just use a card occasionally.
Applying for Too Much Credit Too Quickly. Opening a bunch of accounts all at once is a red flag because it could indicate financial distress. New accounts are also a negative because there’s little or no track record of on-time payments. Building and maintaining a good credit score is a long-term effort, so take a gradual, steady approach to opening new credit accounts.
Not Diversifying Your Credit. It’s often convenient to use just one card for all your needs, but think about it from the credit agency’s perspective. They want to see you managing a healthy mix of credit options, such as an auto loan, credit cards and personal loan.
Does it Damage Your Credit Score to Check It?
No, absolutely not! In fact, it’s really important to check your credit report regularly to make sure there is no inaccurate information and to spot possible fraud, such as someone opening credit in your name. Every consumer is legally entitled to receive a free copy of their credit report each year from each of the three credit reporting agencies, but you have to go through the official website.
You checking your own credit score is completely different from what’s called a “hard inquiry,” which happens when you apply for credit and the lender checks your score. That hard inquiry will temporarily lower your score—another good reason not to apply for lots of new credit all at once.
Does a Debt Consolidation Loan Hurt Your Credit Score?
Yes, but the hit is likely relatively small and only temporary. Remember, any new loan will generate a hard inquiry, but a savvy debt consolidation loan can be a really helpful step for getting out of debt by lowering your monthly payment and allowing you to pay down your balances faster. Key to this strategy is avoiding the temptation to deepen your debt by again running up balances on your credit cards.
Want to learn more about credit reports and lots of other personal financial topics? Explore BluPeak’s free financial-education resources, including webinars such as “Using Credit Cards Wisely,” and tools like online calculators and budgeting worksheets that can help you eliminate stress, build savings and achieve your financial goals.
About BluPeak Credit Union
Founded in 1936, BluPeak Credit Union empowers its nearly 60,000 members to achieve financial wellness through a full range of financial products and services, including checking and savings options, credit cards, loans, mortgages and more. BluPeak has more than $1.2 billion in assets and members can access their accounts through six California branches, nearly 30,000 surcharge-free ATMs nationwide, and 24/7 online and mobile banking.
BluPeak membership is open to all Californians who live, work or worship in Alameda, Sacramento, San Diego, Santa Clara and Yolo counties, as well as those employed by the state of California, and California university employees and students. Formerly known as University & State Employees Credit Union (USECU), we changed our name to BluPeak in 2022. The new name reflects our California roots, is more inclusive to our field of membership, and better conveys our passion for going above all others in our relationships with members.
As a community leader, BluPeak partners with local causes, events and organizations that speak to our commitment to health, wellness and inclusiveness. Learn more at BluPeak.com.