As a companion to my piece explaining why some aren’t qualifying for mortgages even though consumers see record low mortgage rates, here are the top issues that can impact your credit score and lead to you as a consumer having trouble when trying to qualify for that apartment, car loan or mortgage. If you fall into any of these categories, start working to clean up your credit ASAP!
Making late payments
The most important thing you can do to improve your credit or maintain a high credit rating is to pay your bills on time. Conversely, making your payments late can kill your credit. One late payment can drop your score as much as 100 points in one shot. Late payments show potential creditors that you are having trouble handling your finances and since late payments remain on your credit report for seven years, you could be paying for this mistake for a long time.
Carrying too much debt
If you keep your credit cards maxed out it will cost you. Not only in interest, but also your credit score. When paying your credit card bills try to pay as much of the balance as possible. Your credit balances hovering near the limit increases your debt to income ratio and is a red flag to potential creditors that you may be in over your head.
Defaulting on a creditor
Not repaying a loan of any kind can throw your credit score into a nosedive. Most negative information stays on your credit report for seven years, so it can be hard to rebound quickly from a default. If you are having a hard time with payments due to hard economic times, work with your creditors to avoid defaulting. Negotiate smaller payments with your creditor or pay what you can so that you are not in a default status.
Tax Liens/Judgments
Right now, more people are finding themselves in a situation where a lien or judgement has been filed against them for monies owed. Statistics have shown that filings in small claims court are on the rise so companies are taking their claims to court to recoup monies owed to them. What makes this particularly troublesome is that once filed, wages can be garnished, bank accounts seized and future tax refunds applied to the debt. And if the matter is not handled in a sufficient time frame, personal property owned outright can be seized as well. So of course, tax liens and judgements can do a number on your credit and can remain on your report for 10 years. Attempt to work with creditors to avoid this from happening.
Bankruptcy
Once the “dreaded B,” bankruptcy is not viewed as negatively as it once was. However, it will still impact your creditworthiness greatly and remains on your credit report for 10 years. Many individuals have been impacted by unemployment or large medical bills and may think that bankruptcy will give them a fresh start. It will impact access to new credit, home loans and possibly employment opportunities, so be cautious here.
Black Enterprise contributor Jennifer Streaks is a Financial Expert, Author & Pundit. Continue the conversation by following her on twitter @jstreaks or on her website at JenniferStreaks.com. Join her and Sr.VP/Editor-at-Large Alfred Edmond Jr. for the the #MoneyMatters Twitter chat on November 16 a 1 p.m. ET, sponsored by Mass Mutual.