How to Ruin Your Credit

How to Ruin Your Credit

Slide1 (2)You’ve heard Jason Hartman talk a lot about how to build credit and make sound financial choices. What we don’t’ talk much about is the ways in which you may be destroying your financial portfolio. Credit is difficult to build and oh-so-simple to ruin, so make sure you’re avoiding these common pitfalls.

The first way to destroy your credit is by missing payments. Being late by 30 days has a great impact because it reflects your current ability to repay money. So, if you’re frequently late by a month or more, you’re sending a message about your financial state that tells businesses to stay away from you.

Next, your credit score is lowered when you close old accounts. These open accounts, even if they aren’t active, serve as proof that someone once recommended you. And if you’ve had a spotty history with this creditor, that stays with you for seven years, no matter the status of the account. Its better to just leave these open as proof of past credit.

Another way people lower their credit scores is by opening a lot of accounts and maintaining high balances on old and new accounts. So, when you’ve got a lot of debt already out there, your score is lower to indicate to lenders that they might not want to give you the chance to overextend yourself even further. Instead, focus your efforts on paying down debt.

Be aware that default on accounts leading to your debts ending up in collections significantly impacts your credit score, though paying these balances offers partial recovery. Should these debts end in filing for bankruptcy, you’re off the hook for the debts, but your credit is irrevocably damaged.

Finally, make sure that you’re keeping an eye or your credit. No news isn’t necessarily good news—there may be credit reporting errors or cases of identify theft in your past that can easily go unnoticed. Check your credit report annually (its free) and stay on top of your bank and credit card records.

Be sure that you’re educating yourself on past, current, and future financial information and trends so that you’re able to best control your finances. If you’re able, leverage your resources to make profit-making investments to further build your credit and establish financial security. Finally, remember that even good, smart people occasionally make bad financial decisions—don’t be ashamed, but do be proactive and seek assistance from a certified financial professional with your best interests in mind. (

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The Young Wealth Team