What's Bad for Your Credit History; Your Credit History's Worst Enemies

What's Bad for Your Credit History; Your Credit History's Worst Enemies

Your credit history record is the first, second, and third impression that lenders, insurance companies, landlords, and even potential employers receive about you. Every point of your credit score counts to those people. The good news is that you can keep your credit report clean by avoiding credit history mistakes. Check out these down-and-dirty enemies of your credit score.

No credit history record

A clean slate is not your friend when it comes to your credit score. Young people often have the most difficulty getting good credit because they just don't have the steady, established credit history record that lenders like to see.

Defeat the "no credit history record" blues by responsibly managing a low-limit card. Putting utilities in your name also helps establish a good track record for lenders.

Bad credit history

Even worse than having no credit history is racking up a series of credit history mistakes. Your past mistakes will haunt you when it comes time to pull your credit report. Missing payments on utilities, credit cards, and other services sends a clear message to lenders: Don't trust this person. Your credit history mistakes can hurt your credit report for a long time sometimes for up to six years.

Overextended credit

You can overdo credit just like anything else. Your debt-to-credit ratio affects your total credit score. Even if you're making payments on time, running your cards near their limits month after month hurts your credit score.

Try to limit balances to 25 percent or less of the total credit limit for any one card. If one card is approaching its credit limit, stop using your cards, and pay off the excess. This simple step will improve your credit report stats.

Bankruptcy

On the "most wanted" list of credit history mistakes, bankruptcy is considered armed and dangerous. Bankruptcy comes in three varieties, based on the level of financial relief given to the debtor: Chapter 7, Chapter 11 and Chapter 13. Chapter 11 and Chapter 13 filings are radical restructurings of debt that can be used by businesses and individuals to dig out of financial difficulties while still retaining a semblance of credit-worthiness.

Chapter 7 bankruptcy is considered the most toxic type of bankruptcy because varying amounts of debt can be terminated. This is very bad news from a lender's point of view. The impact of this type of bankruptcy is long-lasting and can adversely affect your credit score and credit report for seven to ten years.

There's no doubt about it: You earn every point of your credit score. You owe it to yourself to keep the aforementioned credit history "enemies" away. Keep abreast of your credit score by monitoring your credit history report and practicing good financial habits.

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