Home > Credit 101 > 5 Fast Ways to Tank Your Good Credit Score

Comments 0 Comments

Building a good credit score takes time and effort. Damaging your credit, unfortunately, is a different story. There are few major faux pas that could cause a stellar credit score to plummet seemingly overnight. Here are the big missteps to watch out for.

1. A First Missed Payment

Payment history is the most important component of major credit scoring models. As such, your first 30-day delinquency on a bill can really cost you. In fact, a recent late payment can cause as much as a 90- to 110-point drop on a FICO score of 780 or higher. That’s why it’s always a good idea to talk to your creditor if you accidentally miss a due date — they may be willing to give you a pass and not report the delinquency to the three major credit reporting agencies, especially if you previously had a good track record.

2. Maxing Out a Credit Card

Credit utilization (how much debt you owe versus how much credit has been extended to you) is the second most important factor of credit scores, so maxing out a credit card is not exactly a good idea. While it wouldn’t inflict the same type of damage as a late payment, someone with a good score of 780 would have to weather anywhere from a 25 to 45 point drop for using all of that available credit limit, according to a test scenario conducted by credit scoring model FICO. (That kind hit can be particularly problematic to someone who’s score was on the cusp of greatness.) Remember, as a general rule of thumb, you should keep the amount of debt you owe on each card and collectively below at least 30% and ideally 10% of your available credit.

3. Debt Settlement

Letting a debt go to settlement can also cause a similarly good score to fall around 105 to 125 points, per FICO’s test scenario. Debt settlements include collection, judgment, lien and repossession, Barry Paperno, a credit expert who blogs at Speaking of Credit, said in an email. To avoid taking the major hit, you can try negotiating with a creditor. They may be willing to work a payment plan out with you in lieu of taking one of the aforementioned adverse actions. You can find 10 tips for negotiating with creditors here.

4. Foreclosure

Foreclosures are generally preceded by other negative events (like a first missed payment and 60-day delinquency) that will damage your credit, so it’s unlikely that this incident itself will tank a good score. It’s still worth noting, however, how badly a foreclosure can depress your credit. According to FICO’s test scenario, a score of 680 would fall to anywhere between 575 and 595 once this item hits your credit report. And if you score was somehow in good shape (again, around 780) at the time you could lose anywhere from 140 to160 points as a result.

5. Bankruptcy

Similarly, bankruptcies can make your credit scores plummet by 200 points or more. Keep in mind, too, a bankruptcy can affect your credit far longer than other types of negative information. By law, a Chapter 13 bankruptcy public record will appear in a credit report for 7 years from the filing date, while Chapter 7 and Chapter 11 bankruptcies remains for 10 years. (You can go here to learn about rebuilding your credit after bankruptcy.)

Dealing With the Damages

If you do mis-step, try not to despair, Paperno said.

“The most severe impact to your score will occur on the date the mistake first appears on your credit report,” he said. “After that, as long as you don’t make any more mistakes, the negative effect on your score will lessen over time and allow your credit to recover, albeit slowly. Even though most bad credit marks remain on your credit report for seven years, you can start to see a good score within three to five years with consistently on-time payments, low card balances low and very few newly opened accounts.”

To start rebuilding your credit, focus on getting any delinquent accounts current, making all future payments on time and keeping card balances low. You can track your progress by viewing your free credit report summary, updated each month, on Credit.com.

If you have one of the above derogatory marks on your credit report, but it doesn’t belong to you or you think it’s inaccurate, you can dispute the item with the major credit reporting agencies or someone like a credit repair company to do it for you. Removing that negative, inaccurate information can restore your good credit relatively quickly.

More on Credit Reports & Credit Scores:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team