7 Things that can affect your credit

Credit score is an important number while you apply for any kind of loan – secured or unsecured. Your creditor/lenders will decide whether or not you're creditworthy depending upon this score. If you hurt your credit score, then it would take years to repair it. Thus, it's a better option to protect you score rather than repairing it.

Take a look at 7 things which may affect your credit:

• Defaulting mortgage payment: If your mortgage payments are past due, it'll badly affect your credit report. The lender will start report your late payments to the credit bureau. Late payments are considered as a negative item and it will remain on your credit report for the next 7 years. Moreover, it will also lower your credit score by some points.

• Charge off: If you haven't paid your credit card dues or mortgage payments (especially second mortgage) for quite sometime, the lender may think that you would be unable to pay off the dues. Thus, your creditor/lender will charge off the account to a collection agency. This will have a huge impact on your credit score. Also, in future you won't be able to secure a mortgage unless you pay off the charged off account.

• Constant late payments: Most of us are unaware of the fact that 35% of our credit score is made up of our payment history. If a consumer is constantly late on his/her credit card bills or mortgage payments, even by few days, then it would definitely have a negative affect on your credit score.

• Higher balances on credit cards: The level of debt measured by credit utilization is an important factor in building your credit score. If you have high credit card balances, your credit utilization ratio would increase and it will decreases your credit score.

• Closing down old credit card accounts: Around 15% of your credit score is made up of the length of your credit history. Thus, the longer the credit history, the better for you. If you close down your old credit cards, your credit history will become shorter.

• Judgment against any account: If your credit report mentions of a judgment, then it actually means that you had avoided paying your bills and the creditor had to involve the court to make you pay off the debt. However, if you've a judgment against you, then you should pay it off. A paid judgment is always better than an unpaid one.

• Closing down credit cards which have balances: If you close down your credit card which still has a balance in it, you'll find that your credit limit will drop to $0. However, your balance will remain the same. It will give an impression that you’ve maxed out your credit card. Thus, it will cause your score to drop.