Your credit report and score determine your lifestyle. In personal finance, credit score plays a key role. A good credit score shows your creditworthiness. If you have a good credit score, your chance of obtaining a loan with better terms and conditions is increased.

10 Factors which hurt your credit score

1. Forgetting about your credit report:

You should monitor your credit reports at regular intervals. Otherwise, you will not know even if there’s any wrong negative information on your reports. If there are multiple wrong credit details on your credit report, then your credit score will take a big hit.

So, take some time out of your busy schedule and have a look at your credit report. People often find errors in their credit reports. So, there is no guarantee that there won't be a single error on your credit report. In fact, around 40% of the consumer credit reports consist of wrong information on them.

2. Making late payments:

Your payment history is the key to your credit score. Nearly 35% of your credit score is dependent upon your payment history. If you make late payments regularly, your credit score will surely go down. So, it is recommended that you must pay your bills on time to maintain a good credit score.

3. Skipping a payment:

It may sometimes be the case that you do not make your monthly payments at all. This is more serious than making late payments. The more you default in making monthly payments, the closer you reach to being charged off. This severely affects your credit score.

A single non-payment can ruin your impeccable credit score. Your score can drop by as much as 100 points.

If a single missed payment does not result in extra financial woes, then your score may start improving within a year. If your credit score was poor before the missed payment, then it won't revive within a year.

4. Your account being charged off:

When you stop making payments on your credit cards, your creditors can charge off your account. This puts a severe strain on your credit report.

5. Very high unsecured balances:

It may be the case, you make regular payments, but you have a very high credit card balance. A high credit card balance depresses your credit score. Therefore, try to avoid such a situation.

6. Defaulting on the loan:

Like defaulting on a credit card debt, defaulting on a loan also affects your credit score negatively. Defaulting implies that you have not met the terms and conditions mentioned in the loan contract. So, to preserve your credit score, make sure that you do not default in making payments on the loans that you owe to others.

7. Creditors sending your account to collection agencies:

If you default in making your payments to your creditors, they can send your case to a third-party collection agency. A collection agency status on your credit score implies that your creditors could not get payment from you and they hired a collection agency to do that for them. Your case being referred to a collection agency is not at all a good sign for your credit report.

8. Neglecting a collection account:

You may ignore a bill that has gone to the collection agency. You may assume that there is no need to pay the bill. However, if you do so, your score will be in a big mess. The collection agency will report the account to the credit bureau after a stipulated period. You can lose as much as 100 points.

9.Getting a court verdict:

When you get a court verdict related to your debt payoffs, your credit score is severely damaged. A court judgment implies that you have defaulted in making payments. Then the court orders you repay the debts through wage garnishments. This hurts your credit score badly.

10. Filing for bankruptcy:

Filing for bankruptcy is regarded as the last option available to you. Bankruptcy filing damages your credit score badly and the negative effects remain on your report for a considerable amount of time, about 7 - 10 years. It is recommended that before filing for bankruptcy, you should explore other debt elimination strategies such as credit counseling, debt consolidation, or debt settlement. However, there’s no other option left, bankruptcy can help you make a fresh start of your financial life.

3 Attributes that coexist with poor credit score

You may say that it is a coincidence but 3 traits often coexist with your credit score.

1. Your age is between 19 and 29

   Statistics reveal that people in the age group of 19 - 29 have relatively poor credit scores. According to a report published by Experian a few years back, the average credit score of these young adults was around 672. On the other hand, the average credit score of the people above 66 years was 829. The credit scores of the baby boomers were even better. Their score was around 782.

   The reason might be that young adults are just starting their financial journey. They don't have long credit histories. Their credit-utilization ratio is also high. They are not well-equipped to handle credit. They learn the clever tactics and strategies to handle credit with time. All of these factors lead to lower credit scores.

2. You don't have patience. You're restless

   According to a report published in The Journal of the Association for Psychological Science, people with less patience have lower credit scores. No one is denying the fact that several factors lead to irregular payments of debts. For instance, job loss, reduction in income, expensive medical treatments, etc. can result in poor credit scores. However, the major factor that leads to irregular payment is impatience.

   Lack of proper payments has some serious consequences. Some of them are:

   • Huge money at the present moment
   • Huge debs in the future
   • Higher payments later on
   • Poor credit score

   Impatient people tend to make poor financial planning. They are more concerned about the present moment. They forget to make the debt repayments within the due date. As such, their credit score drops in the future.

3. You love to inhale cigarettes at various times in a day

   If you can't live without taking a puff of a cigarette in a day, then your credit score is likely to go down by nearly 30 points. You may be wondering about the correlation between your smoking habit and credit score. After all, how can a pack of cigarettes affect your credit score?

   Well, research has shown that smokers are unable to control their desires and this affects their financial decisions. They tend to take huge risks which adversely affect their credit score.

   So, quit smoking for a certain period. See the results yourself. You'll have better control over your wishes and desires. This in turn will have a positive impact on your score. Quitting a bad habit can help you stay healthy and stress-free, too.

Finally, women beat men when it comes to credit scores. Women usually can maintain a better credit score than men. The average credit score for males is 675. This figure is 7 points less than that of the women. A reason might be that men carry a higher debt load than women. This single factor makes the women winners and men losers. But, that’s not always true. Studies have found that women are becoming better financial managers with time.

Credit score - Things that will not make a difference

You have got an idea about what things affect your credit score negatively. However, certain things may seem to be hurting your credit score, but actually, they aren’t.

Non-payment of rent: If you have not paid the rent because of a dispute with the landlord, then it does not mean that your credit score will drop. If the landlord does not report it to the credit bureaus, it won’t affect your credit reports. However, a landlord can file a lawsuit against you and receive judgment; when the item will appear on your credit report, it will hurt your score.

Changes in your cash flow: There can be a huge change in your income after you lose your job. You may grab a part-time job or stay unemployed for several months. However, it will not make any difference to your credit score. In fact, your score won’t get affected as long as you pay your bills on time. Your income and assets can influence your chance of obtaining a loan or credit cards at favorable terms and conditions, but your score will remain unaffected.

Late payments to small creditors: Not all the creditors report to the 3 major credit bureaus in the country. For instance, small vendors usually don't report account details to the credit bureaus. So, if you haven’t made payments to the small vendors, then your score may not drop by a single point. But, it is not a good practice to not pay your creditors. So, whenever you take out a loan, make sure you pay it back within the stipulated time.

It can be said that credit score makes a big difference to your financial life. It is a major element of your financial life but not the only one. Lots of other factors play a significant role in determining the nature of your financial life.

5 Unusual ways which may help you increase your credit score

So far we have discussed what factors affect your credit score negatively and what don’t.

Now, let’s talk about 5 unusual ways that may help you increase your credit scores.

1. Making multiple periodic payments throughout the month

   You should remember that the lower the balance, the better it is for your credit report. To lower the balance, you can make periodic payments throughout the month. Some credit card companies could limit the number of times you can pay in a month. You can call your credit card company and negotiate with them so that they are ready to accept multiple payments. It is often easier to make multiple payments than to clear the outstanding bill once a month.

2. Paying off outstanding balances before the due date

   It will be better if you could pay off your dues before the last date of payment. You will be able to know your statement date by calling your lender. Normally, the balance on your last statement date gets reported to the credit bureaus. So, if you pay your bills before the due date, you'll be able to reduce your credit utilization ratio. This will help you in increasing your credit score to a large extent.

3. Save your credit in case of a short sale

   A short sale will damage your credit score and can lower it by about 75-100 points. Apart from that, the lender may also report to the credit bureaus that the loan was settled for less. This might damage your credit further. To avoid this, you can negotiate with your creditor so that they don’t report the balance owed to the credit bureaus. You can negotiate with the creditor before or during the short sale process regarding this issue.

4. Contact your creditor for good-will deletion

   If you've always paid your debts on time but missed your payments 1-2 times, you can request your creditors to remove those negative marks from your credit report by going for the option of good-will deletion. You need to write a Goodwill letter to your creditor regarding the same. However, if you're habitually late, then the lender/creditor won't consider your request.

5. Go for the option of pay for delete

   You can request your collection agency to remove the debt from your credit report by sending them a pay for delete letter. Once you pay off the debt, most collection agencies will be happy to stop reporting the account to the credit bureaus. However, to be on the safer side, you should get this in writing. Ask the collection agency to send you a letter written on their company letterhead that mentions the clause that they will remove the debt from your credit report once you pay it off. It may not happen always but there’s no harm in negotiating for it.

6 Most effective strategies to achieve 800+ credit score

As per the FICO.COM - The average U.S. FICO® Score hit 706 in 2019. “Since bottoming out at 686 in Oct 2009, there have been nine consecutive years of increases in the national average FICO score,” writes Ethan Dornhelm.

The widely popular score ranges from 300-850, on FICO and at its competitor VantageScore. FICO reveals about 1% of its scores reach 850. VantageScore spokesman, Jeff Richardson, also added that fewer than 1% of its scores reach 800+ credit scores.

What are the qualities that 800+ credit score members have?

As per FICO, members of the 800+ credit score club may have these qualities in common:

• They owe less than $3,500 on credit cards.
• They utilize only 7% of their credit limit.
• Their credit history is about 25 years.
• No late payments are there on their credit reports (it means since the last 7 years they do not have a single late payment).

What are the benefits of an 800+ credit score?

So, what benefits can you achieve by gaining an 800 credit score? Is it necessary to have an excellent credit score after all?

The below-given list gives you a sample of the benefits that come with high credit scores.

An 800+ credit score can get you: