Actions, Even Small Ones, Can Affect Your Credit Score

Online, September 21, 2011 (Newswire.com) - One of the greatest mysteries, at least when it comes to credit scores, has been the affect your actions have on your score. It has been difficult not only to understand, but also to determine. There are certain actions that you know will have an affect on your score - like paying your bills late, a foreclosure or a bankruptcy. But how much will these things affect your score?

The answer has always been that it varies from person to person. FICO has never really released details about how these actions, specifically, can affect your score. But certain actions on your part will have specific repercussions.

If you max out your credit card, and you have a healthy credit score, say, 700 or more, you'll find that you stand to lose more points than someone with a lower score. Why? Because FICO's system is set up to red flag any sign that you might be sinking - and with a high credit score, and the sudden maxing out of your credit card, it appears there's a problem. On the flip side, if you already have a lower credit score, and you max out your card, it appears your behavior hasn't changed. It will still affect your score, but just not as much.

If you miss a bill payment altogether, your score will be hit fairly hard. Get 30 days behind, and you'll lose 60 to 80 points with a lower credit score, and from 90 to 110 points if you have a high score.

For those in over their heads, settling your debt sounds like a dream come true. But this can have a severe affect on your credit score, no matter whether your score is high or low. For those with low scores, you could lose 45 to 65 points. Those with credit scores of 780 or higher could lose 105 to 125 points.

If you suffer through a foreclosure, which has become all too common a scenario in recent years, you'll lose 85 to 105 points if you have a lower credit score, 140 to 160 points if your score is higher.

As a last resort, bankruptcy can seem like a lifeline. Bankruptcy is often the choice that's the lesser of two evils. But filing for bankruptcy can remove 130 to 150 points from a lower score, and 220 to 240 points from a higher score.

All of these things combined can, obviously, ruin your good credit, or make a shaky situation much worse. But you can work to improve your score and and recover from your current situation.

First of all, you should make sure to pay your bills on time, every time. Your credit report should also show a mix of credit - in other words, spread your debt around to include a mortgage, car loan and personal loans, as well as credit cards or lines of credit.

In addition, you should hold off closing accounts, and only apply for new credit if absolutely necessary.