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The 5 Easiest Ways To Ruin Your Credit Rating

These days, keeping a good credit rating requires navigating a dangerous maze of credit cards, home equity loans, auto loans, and an uncertain health insurance system. Here's a list of the top dangers to your credit score, from easiest to hardest:

1. Closing your account:

Closing a credit card account lowers the amount of credit you have available, obviously. What's not as obvious is the effect this has on your credit rating, which can plummet as much as 100 points in only 2 months as a result of closing a credit account. Why? Because one of the most important factors in calculating credit score is your "percentage of credit available", and decreasing your available credit drops this score. Try to keep as much available credit as possible by using your card at least once a year on a small purchase to keep your account active. And remember, unless your card has an annual fee, do NOT cancel it!

2. Maxed out spending

Banks like to see credit cards with high limits and minimal balances. These "open" cards are a sign of a financially responsible borrower they're likely to get their money back from. A maxed-out card, on the other hand, creates doubt about whether the card holder can afford their purchases, and leads to lowered credit scores. Applying for new credit cards and requesting higher limits on existing cards can help to fix this problem.

3. Medical Debt Collections

Health insurance is not exactly known for its reliability - it's not uncommon for patients to receive a bill for something they think their health insurance covers, then discover their insurance company won't pay it. By then, the doctor's office has turned the debt over to collection, and your credit score has taken the damage. Protect yourself against this by checking every bill with both your doctor and insurance company to make sure it's paid. That extra bit of time you put in could save your credit score 50 points.

4. Co-signing:

Co-signing a loan for a friend or family member is sure to win you brownie points with them - but those points might be coming straight from your credit score! You are responsible for any loan you co-sign on, and if the bills aren't paid or your co-signer files for bankruptcy, your credit rating will decrease. Even if you can prove it's not your fault, or you haven't filed for bankruptcy yourself, your credit will still be affected. Be wary - don't co-sign for anyone unless you can afford to pay it off yourself.

5. Paying Bills Late

Can't remember to pay your bills? It could be the only thing keeping you from perfect credit! There are tons of people out there who do everything else right, but have poor credit simply because they pay their bills late. To make sure your bills are paid on time, every time, visit your bank and ask about an automatic bill payment program. Once you enrol in this, your bank will automatically send a payment to your creditor each month from your account. This will improve your credit by making sure you're never late with a payment again, and can save you money by preventing late fees!