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Financial mistakes that impact your credit score

By Brian Anderson
Published: Monday, June 20th, 2011

Financial mistakes that impact your credit scoreThere are some things that can seriously affect your credit scores. Late payment of bills is one such thing, foreclosure, and bankruptcies are the others. All of these financial blunders can cause a serious dip in the credit scores. There is some amount of mystery regarding the way the FICO scores are calculated and no one really knows the precise detailing that goes into the calculation of the FICO score. However, it is important to understand that the FICO score is something that will affect all aspects of your life starting from auto insurance premiums to getting credit. Everything that has to do with the creditworthiness of a person essentially depends on the credit score.

Of late however, FICO has thrown some light on how some of these events can affect a person’s credit rating. These are known as the ‘damage points’ and these are something to watch out for as they can really pull your scores down. Some of the common mistakes that can affect credit scores according to Fair Isaac are:

  • If you have a FICO score of 680 and if you have a maxed out card then you would be down by 10-30 points and if your FICO score is 780 then you would be down by 25-45 points.
  • If you are late on payments and your FICO score is 680 then you would be down by 60 to 80 points and if your FICO score is 780 then you would be down by 90-110 points.
  • If you opt for a debt settlement and if your FICO score is 680 then you would be down by 45-65 points and if your FICO score is 780 then you would be down 105-125 points.
  • If you opt for foreclosure with a FICO score of 680 then you would be down by 85-105 points and if your FICO score is 780 then you would be down by 140-160 points.
  • If you have filed for bankruptcy and if your FICO score is 680 then you would be down 130-150 points and if your FICO score is 780 then you would be down 220-240 points.

Hence, you must watch out before maxing out your credit card, late payments, debt settlements, foreclosures, or bankruptcy. This indicates just one thing which is the better your credit rating the more FICO scores fall when you make such blunders. Even a single late payment can move you to a higher interest bracket while applying for credit.

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