man holding a credit card while making an online purchase on a laptop

Know your credit score factors.

Written by Jillian Walsh

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How to keep your credit score from shrinking when times are tight. 

It’s tempting to pull out that credit card to pay bills or purchase necessities when times are tight. But too much credit use and late payments can lead to a downward spiral for your credit score.

Credit scores typically range from 300 to 850. Lenders use these scores to determine how likely you are to pay back your debt before deciding whether or not to give you a new credit card or a new loan.

Credit bureaus keep records about two types of debt that affect your credit score.

Installment credit includes the loans borrowed at a fixed amount, agreeing to a monthly payment on the balance until it is paid off. These include student loans, mortgages, and personal loans.

Revolving credit includes credit cards and some home equity loans. Revolving credit interest can fluctuate and usually has no pay-off schedule or fixed term. 

The top five factors that determine your credit score are payment history, credit utilization, credit history length, credit mix, and new credit.

We’ve passed on some suggestions from about how you can improve your credit score. Check them out here

Let’s look at 4 ways to keep you on track and avoid credit pitfalls.

There are four simple “don’ts” to remember whenever you enter a credit agreement. It’s vital that you keep track of these pitfalls, especially when you’re going through a rough patch.

a stack of credit card bills marked as past due

1. Don’t be late.

Your payment history is one of the biggest factors in your FICO score, so pay your bills on time. One 30-day late or missed payment can drop your score.

Consider enrolling in automatic payments from your bank account to assure you pay on time. If you do miss a payment, be sure to contact your creditor and explain your problem. Often creditors will forgive one late payment, as long as your credit history with them has been in good order.

2. Don’t use your limit.

A high credit limit can be intoxicating, but it doesn’t mean you can charge to the limit without difficulties. These limits rarely take into consideration what other expenses you have. Using up your credit is also a red flag in determining your credit score. Lenders prefer a credit utilization that is below 30%, and under 10% looks even better. The ratio of credit utilization determines 30% of a credit score.

3. Don’t request too much credit all at once.

Each time you request credit, the lender will request a credit report, and the inquiry is recorded in your credit file. A lender will look at your number of credit requests to determine how much credit you are requesting. A high number of requests in a short period of time can imply that the borrower is in financial trouble.

4. Don’t default.

Foreclosure, bankruptcy, repossession, and settled accounts are negative marks on your credit that will appear on your credit report and can negatively influence your score. These kinds of negative credit issues can impact your credit for up to ten years.

A personal loan can help ease the pain until you get back on your feet.

There are some advantages to obtaining a personal loan to get you through difficult financial times, pay bills, and make ends meet.

Payments are more stable than credit cards.

With a fixed-rate personal loan, your monthly payment stays the same for the life of the loan, so you can easily plan your budget.

You can eliminate or consolidate credit card debts.

A personal loan can help you take all those bills — credit cards, medical, and payday loans — and pay them off, leaving you to make just one consistent payment per month. Unlike credit cards with changing payments and rates, you’ll know your exact monthly payment and how long it will take to pay off your loan. Compared to high-interest credit cards, you may even save money.

The information and materials provided on this website are intended for informational purposes only, and should not be treated an offer or solicitation of credit or any other product or service of Regional Finance or any other company. This website may contain links to websites controlled or offered by third parties. We have not reviewed all of the third party sites linked to this website and are not responsible for the content, products, privacy policy, security, or practices of any linked third party website. The inclusion of any third party link does not imply any endorsement by Regional Finance of the linked third party, its website, or its product or services. Use of any third party website is at your own risk.

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