A lot about credit often on this channel and in particular the best ways to improve credit scores through various tricks and best practices.
Along with the positive things that you can do to have fantastic credit there are also several negative things that you're going to want to avoid at all costs.
In today's article, we're gonna look at the seven deadly sins when it comes to your FICO scores.
We're gonna be talking about credit scores and specifically the seven things that you want to avoid in order to keep your credit scores exactly where you want.
Them the better they are the more wealth you can create.
#1. The first deadly sin is an obvious one this is where you have significant or serious late payments and we're talking late payments of thirty days or longer.
Obviously the longer you're late the worse off it's going to count against you. but a common misconception is that a thirty-day late payment doesn't really affect your credit scores.
The truth is it will have a negative impact on your credit score. sometimes it's bigger than other times but paying on time is worth thirty-five percent of your overall scores health.
So it's gonna have a negative impact and late payments can remain on your credit report for seven years.
So your best bet is to make sure that you're always paying on time if not early.
#2. The second sin is collections and the moment a lender enlists the help of a third-party collection agency to recover money that you owe on that account you're in bad shape.
Though you may be able to rectify it before the collection agency reports the collection account to the credit bureaus you should never put yourself in this position in the first place.
If circumstances are making this situation look likely for you it's always in your best interests to get on the phone communicate very very well work with your lender before they get a collection agency involved.
You don't want to avoid dealing with the situation as it's only gonna get worse and worse and worse progressively once a collection agency is actually involved.
This too will remain on your credit report for up to seven years.
#3. The third sin our settlements let's say you found yourself in a situation where collections were looking probable because you were unable to keep up with one of your loans and so to avoid collections you decided to negotiate a settlement with that lender.
Though this did keep it out of collections the fact that you actually paid only a portion of what you owe we'll still negatively affect your credit report.
And interestingly mortgage short sales are often reported as settlements too so that's something to keep in mind if you overextend yourself with your home.
Settlements will also remain on your credit report for as long as seven years.
#4. The fourth sin I want to discuss our public records and these are things like bankruptcy tax liens judgments against you et cetera.
And there is no such thing as a good public record when it comes to your credit reporting bankruptcies can remain on your credit report for up to ten years pretty painful judgments 4:7.
And unpaid tax liens can stay indefinitely so steer clear of these things at all costs.
#5. Now the fifth deadly sin our target of sin charge-offs or when a lender acknowledges that they're not going to get paid and basically they're throwing in the towel when it comes to your loan and just like numbers one through three charge-offs can also remain on your credit report for seven years.
#6. The sixth or repossessions and I think we can agree that repossessions are not just embarrassing but they do look terrible on credit reports no big surprise.
So be sure you're paying for your vehicles things like your car your boat your motorcycle loans these are the most typical type of purchases that are associated with repossessions.
But other things like household items televisions furniture any other items that you finance where there's collateral an item purchased those things can be repossessed as well and repossessions will also hang on your credit report for seven years so again definitely this is a conversation about not overextending ourselves.
#7. The last deadly sin are foreclosures and this is an obvious one - I realize but the key here is if you're unable to pay your mortgage then the bank is going to want the house back.
Not only is this an awful thing to go through having to quickly move your possessions out and find another place to live but in most cases they even send the police to escort you out.
So seeing that on your credit report for the seven years is gonna just bring back lots of bad memories for you.
To wrap things up guys it's important to know that these seven deadly sins for your credit are gonna stick around for quite a while they can really put a wrench in your future plans and that's the last thing you want especially as we approach
what many believe is going to be another big recession.
It can also result in having to put your life essentially on pause for the next seven-plus years I knew so many people during the last downturn that were falling victim to overextension.
And ended up having a short sale or for clothes on properties, therefore, preventing them from being able to take advantage of some of the best opportunities that came about over the last decade.
And you may think that these are all obvious and that you'd never have to deal with any of them but
just knowing how much of a negative impact they'll have on your credit and, potentially on your future should be that little extra bit of deterrent to cause you to be mindful about the financial decisions that you're making.
And through your current financial situation you know you're gonna want to look at it very very closely.
It may not look as great as you want it to but if you overextend yourself on debts it can be fatal to you.
It's all about good planning great discipline especially when it comes to big purchases like a home.
It can be easy to stretch that budget just bit by bit by bit and we saw people justify this regularly during the seven years that I was licensed to originate residential financing.
And when we were getting people loans we saw people time and time again justifying spending an extra $500 and fifty dollars each month by bumping their mortgage sighs.
And it's easy to do we get emotional if you find yourself thinking about doing that it might be helpful to just stop recognize that as your litmus test and think about a worst-case scenario.
What happens if your income was cut by half what if your business started to dry up what if you ended up having to transition from what you were doing into something completely.
New what then what if you ended up having to move unexpectedly geographically would the property then be able to sell what if the property dipped in value by a hundred two hundred three hundred thousand dollars would you be able to afford it would a tenant be able to help cover your costs these are questions are gonna want to be evaluating in depth beforehand.