What Hurts My Credit Scores

As any good loan officer, mortgage banker and realtor will tell you, in order to qualify for a home you usually need to be at least at a 620. However, as you can see up in the image above even 620 scores are not considered good. It is estimated that the average American falls just below a fair credit score. Now does that mean that a person has to stay there? Absolutely not? No matter how banged up a person's credit score is, there are ways to fix them and that is where we at Angle Financial Services come in and help fix people's credit so they can buy that new home. However a lot of people ask me, why is my credit score so low? So in this article I am going to take my time and show you what can hurt your credit scores.

So first, before we discuss what hurts your credit scores, let's take a look at what makes up your credit score or your Fico Score. There are five key categories that make up the Fico Score. First is the type of credit that you have, is it an installment loan, is it an auto loan, is it a revolving line of credit. Second is, how much new credit do you have, and tied to that is how many inquires do you have? Now with the inquiries, if you have too many inquires within the last 90 days, that can lower your credit score as well.

The third factor is the age of your credit, so how long have your lines been open. Obviously, the longer the credit has been in place, it shows stability, and it also shows that the person knows how to maintain their credit. Up next is one that hurts a lot of people, credit utilization. Now for credit utilization, they are looking mostly at the revolving lines of credit. Are all your credit cards maxed out? If so that will damage your scores as well. Lastly, and you can probably guess what it is payment history is. How well do you pay your bills? This is the biggest factor out of all the ones that we talked about, and it makes up 35% of your score by itself.

So now, let's list what can hurt your credit scores, and I will list them briefly. First up is bankruptcies. This is a very big one that can affect credit scores and make it hard for a person to buy a home. Second, foreclosures, which show that a person lost a home and could not maintain that home. Third, tax liens can stay on your credit report for a long period of time whether they are paid or unpaid. Up next is what is called judgments, which occur after a person has been served for a court appearance and the court has found against the debtor.

Next up we have repossessions and these appear a lot on credit reports and that means that a person had their vehicle taken back by the creditor or dealer. There are two types of repo's voluntary and involuntary and they both damage your credit. Next up, as we talked about earlier is inquiries. Now there are two types of inquiries, a hard inquiry, and a soft inquiry. A hard inquiry would be applying for a car or a mortgage. A soft inquiry would be like going to a credit monitoring service and checking your credit. Soft inquiries do not damage your scores, too many hard one's will.

Up next is collections, and collections can affect your score more than most negative items. The problem with collections is that it can be any type of account, like a medical bill, electric, cell phone, cable, etc. The hard part about collections is that they can be sold numerous times. To go with collections we will include charged-off accounts. This is when the existing company has written off the debt and has given up trying to collect the debt and it is sold to a collection company and they try to collect the debt and usually more. The last one I want to talk about is late payments and past due payments, and they can be anywhere from 30 days late, 60 days late, 90 days late, or more. Now those usually will show up in your payment history.

Now in spite of the fact that there a lot of negative ways a client can damage or lower their credit scores, the great thing is that a credit repair agency can help a client fix their credit scores, remove some of the negative items in a legal way under the Fair Credit Reporting Act and help get a client where they can get pre-approved for their home. In most cases a person has to just simply take the first step, and contact a credit repair specialist, second recognize and know it will not get fixed overnight because it did not get damaged overnight, and third know that there will be an expense, but do not look at it as a bill, look at it as investing in your future.