How many credit score points will a late payment cost you?
December 30, 2009
Some light has been shed on the mysteries of just how our credit scores are affected by different things.
Our credit scores are calculated using a long-secret formula created by FICO (Fair Isaac Company), which created and computes our scores. FICO has recently disclosed to MSN financial columnist Liz Pulliam Weston how certain things like late payments, a debt settlement, a foreclosure or a bankruptcy will really affect your credit score.
Liz asked FICO to calculate the hit your score would take for each of these scenarios for someone with a 680 credit score and someone with a 780 score. (A 780 score is considered an excellent score.)
I was very surprised to see that the person with the higher credit score is likely to take a much bigger hit for everything from the late payment to a bankruptcy. Of course, no two customers are alike, so the point deductions will vary, even between two people with a 780 credit score.
According to Liz’s article, the point system takes into account any calculation that you’re in over your head. Things like late payments and maxed out credit cards are considered indicators that you might be headed for financial trouble.
Take a look at the story by clicking here. You can see for yourself how negative credit information may affect your credit score.
The important thing to take away from this is that you do not want to make late payments or max out your credit card. And you certainly don’t want to lose your home to foreclosure or file for bankruptcy if there is a reasonable way to avoid it.
If you have a low credit score, it is important to work to raise it. And if you have a high credit score, you want to keep it high. Credit scores have become increasingly important if you need or want to borrow money, buy a car or purchase a home. Credit scores can also affect your ability to buy a cell phone or how much you’ll pay for insurance.
If you are unable to make your credit card payments on time, are struggling with debt or are facing foreclosure, get help immediately. You can contact the counselors at Advantage CCS for reliable help exploring your debt relief options.
- SEARCH:
