Wrong Practices That Can Lead To A Bad Credit Score

A person’s credit score is a three-digit number is between 300 and 900. These scores will help summarize your past records of debts, with both credit cards and loans. Financial institutions like banks usually rely on credit scores for them to check your creditworthiness. This creditworthiness will determine if they should allow you to borrow money or to give you a credit card.

There are some countries that consider the 750 score as a bad credit score. The lower a person’s score, the higher your risk is to the lender. There are also some instances where a bad credit score can even lead to the rejection of your credit card application or your loan. If given a loan or a credit card, the interest rates will become higher.

So below are some of the most common wrong practices that can lead to a bad credit score. Familiarizing yourself with the information below will help you avoid them and help you maintain a good credit score.

1. Default Accounts Where You’re A Guarantor

If you have joint loan accounts, or you became a guarantor or a co-signee, your score can also be affected if that account becomes a default one. This means that any default loans of the primary applicant where you are a guarantor will also show up on your credit report. It can bring your credit score down, unless you make the payments yourself.

2. Choosing Settlements

Some people fail to repay all their debts in full, and this will make the lender offer you a settlement where you can pay your loan at a discounted rate. While this may seem very tempting, it will only ruin your credit score. The reason behind this is because the lender will report your debt as paid via settlement. This can impact your credit score, thus making it a bad one in the long run. You will become a credit risk to lenders.

3. Lender Forgot To Report Your Debt Repayments

There are also some instances where the lender forgets to report your payments for the debt that you have. This can cause your credit accounts that are already closed to be shown as active. It may not be your fault, but with your credit report being inaccurate, your credit score will remain poor. That is why it is always important to check your credit reports to ensure that the information stated there are all correct.

4. Lots Of Credit Inquiries

Every time you apply for a credit card or a loan, those inquiries will be raised and recorded in your credit report. This will show up every time a prospective lender starts to pull your credit score. Making too many inquiries in just a short period of time can make an impression that you desperately need money, thus becoming a potential credit risk. It can lower your score, making it difficult for you to get approved for credit cards and new loans.

5. Credit Card Utilization Rate Is High

Another wrong practice that credit card owners do is that they have a high credit card utilization rate. This means that your credit card company may tag you as a high risk. The rate will usually depict the average credit card balances against the limit in all of your available cards. Excessive usage of your limit may tag you as a high-risk customer because it will look like you’re not managing your finances properly. So always make sure to never go above 30% of your total credit limits.

6. Late Payments On Debts

Late payments on debts can hugely impact your credit score. Your credit card and loan dues constitute around 35% of your overall credit score. Every time you are late with your payment, the lender will report that as delayed or default to the credit information bureaus. They are the ones responsible for deducting the score in your overall credit score. Some factors that can affect your credit score are your late payments, outstanding credit card or loan bill, and how long it took you to repay your debts.

Another bad thing about this is that your records on late payments can also remain on your credit report for a number of years. That is why it is important to always make sure that you are paying your credit card and loan bills on time. It is still best to ensure that your repayment record will be clean to avoid issues. You can always contact the lender to talk about any repayment terms without ruining your credit score.


These are all the wrong practices that can lead to a bad credit score. You can either avoid everything above, or if you’ve been doing them, it would be best to stop and deal with everything needed to fix your credit score. Always keep your financial records clean to avoid problems in the future.

Based on Materials from Paisa Bazaar
Photo Sources: Flickr, Picpedia, The Blue Diamond Gallery, Fresh Books