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How To Destroy Your Credit Rating

Interesting article seen in the Averbach Blog, by Mike Averbach and justin Blacklock

Think you have a great credit score?  You could be dead wrong!  There are many ways to drive your credit score down fast .... some of them don't take any effort at all!

Here are a few examples:

One young lady collected a few tickets from a parking lot she thought ought to be free.  She trashed the tickets saying, "Who do they think they are? They're not the police."  Turns out the parking lot guy doesn't have to be the police. 

A very NOT nice young man kicked out his live-in girlfriend just before going on a six-month trip "to find himself."  He sent a buddy to oversee the girlfriend's move-out.  The buddy didn't pay attention when the girlfriend picked up the phone saying, "I've got to let someone know I'm on my way."  Turns out she phoned the 24/7 weather advisory in Tokyo and left the phone off the hook.  The phone company eventually disconnected, but only after they'd made a few thousand bucks.

An older gentleman was in an accident and had to be carted away by ambulance.  He was very grateful that ambulances existed, and honestly thought that he didn't have to pay the bill.  He figured it was all covered by his Provincial Health Care plan.  Turned out he was wrong.

Even though their best friends advised against it, Mom and Dad figured their kids were "good kids" just going through a bit of trouble. They co-signed a loan.  Turned out their kids were deadbeats.

There are hundreds of similar stories -- some funny, some sad, some pathetic, but all ending in damaged credit ratings.

Over 30% of your credit score is based on your bill payment history. It's not a big surprise that not paying your bills period, or not paying your bills on time will affect your score, but did you know that the following can also impact you negatively?

Paying the minimum or less on your credit cards.
Maxing out your credit cards. You should keep the balance on your cards as low as you can. Do your best not to go over 70% of your limit.
Collecting a stack of low limit credit cards. You are better off having one or two cards and upping the limit on them.
Closing out your long-term established credit accounts and opening new ones. Good long-term credit history is a plus factor. Don't close long established accounts.  If you think you can get better rates elsewhere, try negotiating with your long-term account first.
Applying for multiple credit cards in a short time period triggers a warning signal that may negatively affect your score.

Let's say you are doing it all right:

you pay your bills on time
you have one or two credit cards with no or low balances
you have established yourself as a great credit risk by taking out a loan and paying it off
you don't have hinky girlfriends or boyfriends
you make sure all your auto-pay creditors are informed of changes when your credit cards are renewed
you make sure you notify all creditors of change of address when you move.  Better yet, you pay Canada Post for a year of mail forwarding.
you don't co-sign loans to financially stretched friends, relatives, or children unless you are prepared to take up the slack if they can't pay.
You could be a perfect consumer and STILL be hit hard. 

Identity theft is an increasing problem that can have a huge impact on your life and your credit.  For simple, basic protection, get a shredder and get in the habit of shredding everything with your name and address and any other personal information on it.  Be careful about who you give your personal information to.  No one needs your social insurance number except the banks, so don't give it to anyone for any reason. 

Here is a great video that gives you seven steps you can easily take to help prevent identity theft.

We've just touched the surface about protecting your Credit Score in this article.  Keep visiting the Averbach Blog for more information.

If you are considering a home purchase or a change in your mortgage, be sure to contact us well ahead of time. We can advise you on your credit score and let you know if there is a problem and how it will impact you.  

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