It takes a lot of hard work, effort, and time to build up a good credit score. But, wrecking your score can happen in the blink of an eye.
Think about it like the story of Sisyphus. He’s the ancient Greek guy who was sentenced by the gods to roll a huge rock up a steep hill and every time he got near the top… the rock got away from him and rolled all the way back down to the bottom of the hill.
Like this little guy here:
YOU are Sisyphus. The HILL is the FICO credit score system. Your spending habits are the ROCK.
You work your tail off making all your payments on time, being careful not to rack up too much debt on your cards, and practicing overall good spending habits.
You’re rolling that big ol’ rock right up that hill – little by little. Weeks become months… months become years… and your credit score rises. Good job!
Then wham… one misstep and you lose hold of that rock. It rolls back down the hill and you have to start over again.
And guess how long it could take to get back to where you were? 7 years!
Yes, that’s right. It takes seven years for negative remarks to age off your credit report.
I’m ready to restore my credit! Schedule my free consultation today.
Now, it’s not all doom and gloom. One late payment is not going to tank your credit score, but it will give it a good ding. The later your payment is, and the more recently it occurred, the more of an effect it can have.
In fact, only one 90-day late payment can have the same effect on your credit score as a bankruptcy, judgement, or repossession! Yikes!!
As time goes on (and you work hard to get that rock back up the hill), those negative entries have less and less of an effect. After two or three years of on time payments and good credit habits, you will almost be back where you were before (almost, but not quite).
Late and missed credit card payments are not the only ways to “drop the rock”. Here are some others:
Closing older credit card accounts – this lowers your available credit and raises your utilization ratio. You look more in debt and like more of a risk to lenders. You also lose the benefit of the credit history if it was one of your oldest accounts.
Unless you are being charged high annual fees, there’s really no reason to close an old account in good standing. (If there are old fees and negative remarks on the account, they will not disappear when you close the account. In fact, closing the account may put your delinquent account back on the creditor’s radar and encourage them to send it to collection.)
Falling behind on student loans – Most student loan lenders will work with you if you are having trouble making payments and there are all kinds of student loan forgiveness programs. You have to be proactive and contact your lender as soon as you realize you will have trouble making your required monthly payment.
Falling behind on your rent – Landlords can (and do) report to the credit bureaus when you are late with your rent. If you fall so far behind that you get a judgement against you, your credit score will suffer even more. It is far cheaper to swallow your pride and ask to move in with a friend or relative (and pay the broken lease fees) than to get evicted or taken to court for back rent.
Bouncing checks – Banks do not report directly to the three major credit reporting companies, but the business you wrote the bad check to may take you to court or send the account to collection. Those DO get reported. Make a budget, track your spending, and start building an emergency fund for… um… emergencies. Vow right now to NEVER bounce another check.
Spending too much on your credit cards – Just because the bank says you can borrow $9 Grand on your credit card doesn’t mean you can actually afford to do it! A good rule of thumb is to keep your balances below 35% of your credit limit. It’s best to stay below the 10% mark. And don’t ever believe it when someone tells you that you have to carry a balance from month to month to build good credit. As long as you use your card a few times a year to keep it active – and make all your payments on time – your credit will continue to build.
Not reviewing your credit report at least once a year – credit reporting errors and identity theft can tank your credit score and you may never know until you apply for financing. You can go to annualcreditreport.com and download a free copy of your credit report from each of the three credit reporting companies once every year. If you schedule it right, you can review the information on your credit report every four months for free – forever! Find the details here.
So what’s the moral of the story?
Don’t drop the rock! (And if you do, work your tail off to start rolling that rock back up the hill as fast as you can.)
If you need a little help getting that big ol’ rock back up the credit score hill, give NCES a call. We are one of America’s favorite credit education and restoration companies. We’ve helped thousands of people, just like you, rebuild their credit and regain 50, 100, 150 points (or more!) on their credit scores. Start seeing results in less than 2 months and gain the confidence you need to plan for a better future.
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If you have any questions, please give us a call at 770-952-5168 or contact us online.
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This information is intended for informational and educational purposes only and not as legal advice. If you have concerns about your credit report, harassment, identity theft, illegal collections activity, garnishments, or property liens, you should consult an attorney who specializes in consumer rights and defense.