what habit lowers your credit score everfi

3 min read 27-02-2025

what habit lowers your credit score everfi

Meta Description: Discover the #1 habit that silently damages your credit score, according to Everfi. Learn how late payments, high credit utilization, and other factors impact your financial health and how to rebuild your credit. This comprehensive guide reveals simple strategies to improve your score and achieve your financial goals.

Introduction:

Maintaining a healthy credit score is crucial for your financial well-being. It impacts everything from loan interest rates to securing an apartment. One seemingly small habit can significantly damage your credit score: consistently paying your bills late. This article explores this and other habits that negatively impact your credit, drawing on insights from Everfi's financial literacy programs. Let's delve into the details and learn how to improve your credit score.

The Biggest Credit Score Killer: Late Payments

According to Everfi and numerous credit scoring models, late payments are the single most damaging habit to your credit score. Even one missed payment can have a lasting negative impact. Consistent lateness sends a red flag to lenders, indicating a higher risk of default.

Why Late Payments Hurt Your Score

Negative Reporting: Late payments are reported to credit bureaus (Equifax, Experian, and TransUnion). These reports stay on your credit report for several years, significantly lowering your score.
Increased Interest Rates: Lenders view late payments as a sign of unreliability. This often results in higher interest rates on future loans, costing you more money over time.
Loan Application Rejection: A history of late payments can lead to loan applications being rejected. This limits your access to credit and can hinder major financial goals, like buying a house or car.

How to Avoid Late Payments

Set Reminders: Utilize online banking features, calendar alerts, or even sticky notes to remind yourself of payment due dates.
Automate Payments: Set up automatic payments for recurring bills like credit cards, mortgages, and utilities. This ensures on-time payments every time.
Budget Effectively: Create a realistic budget that allocates funds for all your bills. This prevents unexpected shortfalls that might lead to late payments.

Other Credit Score Damaging Habits

While late payments are the most significant factor, several other habits can negatively affect your credit score. Understanding these will help you maintain a healthy financial standing.

High Credit Utilization

Maintaining a high credit utilization ratio (the amount of credit you use compared to your total available credit) hurts your credit score. Ideally, keep your utilization below 30%, and even lower is better.

Opening Many New Accounts Quickly

Applying for numerous credit accounts in a short period can also negatively impact your credit score. This signals to lenders that you might be overextending yourself financially.

Ignoring Errors on Your Credit Report

Regularly reviewing your credit report from all three major bureaus is essential. Dispute any inaccuracies or errors immediately to protect your score.

Declaring Bankruptcy or Foreclosure

These events have a severely detrimental effect on your credit score and remain on your report for many years. It’s crucial to take steps to rebuild your credit after such occurrences.

Rebuilding Your Credit

Even if you've made mistakes in the past, it's possible to rebuild your credit score. Here are some key strategies:

Pay Bills on Time: This is the most important step. Consistent on-time payments demonstrate financial responsibility to lenders.
Reduce Credit Utilization: Pay down existing debts to lower your credit utilization ratio.
Monitor Your Credit Report: Regularly check your credit reports for errors and identify areas for improvement.
Consider a Secured Credit Card: This can help rebuild credit if you have limited or damaged credit history.

Conclusion

Protecting your credit score requires consistent effort and mindful financial habits. Avoiding late payments, maintaining low credit utilization, and regularly monitoring your credit report are crucial steps. By understanding how your actions impact your credit score, you can take control of your financial future and achieve your financial goals. Remember, building good credit takes time and discipline, but the rewards are well worth the effort. Use the resources provided by Everfi and other financial literacy organizations to learn more and make informed decisions about your finances.