Poor Credit History:

What Makes It Poor?


Learn About Credit HistoryHow fast can you establish a poor credit history? If you know what factors drive a credit score into the dumps, you can put even the best personal credit history through the wringer in no time.

Building a poor credit history: Unemployment

If you want to transform an excellent personal credit history into a credit nightmare, losing your job is a good place to start. Periods of unemployment can send your credit score into a nosedive as you struggle to meet the bills.

Building a poor credit history: No credit history

One way to give yourself a poor credit history is to never establish a personal credit history at all. Don't put utilities in your name, don't open charge accounts at stores, don't get a gas card, and never apply for loans, lines of credit, or credit cards. Having no credit history will hamper your ability to finance major purchases such as a car or a home almost as much as a personal credit history full of mistakes.

Building a poor credit history: Late payments

Late payments can wreak havoc on your personal credit history. The occasional late payment is usually nothing to worry about. However, racking up several consecutive late payments will be a red flag to the credit reporting agencies. Recent episodes of late payments are also troubling to the credit bureaus because they can indicate financial difficulty.

Building a poor credit history: Excessive credit report inquiries

To damage your credit history, apply for a bunch of credit cards simultaneously. Every time you apply for a loan, line of credit, credit card, or store credit card, those lenders will request your personal credit history from the major credit bureaus. Multiple inquiries in a short time frame send the message that you're desperate or impulsive, and the effect on your credit score is immediate and negative.

Building a poor credit history: High credit card balances

If you want to establish a bad credit history, charge your cards up to their limits, and keep them there. Your credit score is based on your ratio of total debt to total available credit. As your credit card balances go up, your credit score goes down.

Building a poor credit history: Bankruptcy

Bankruptcy is the undisputed champion at destroying an excellent credit rating. By law, bankruptcy filings can remain on your personal credit history for up to 10 years. During that time, you'll find it much harder to obtain loans at decent rates, get a mortgage, or even get affordable car insurance.

Fortunately, there are steps you can take to build a strong credit history. A good way to start is by monitoring your credit, making sound financial decisions, and paying your bills on time.

 

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