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Top 10 things that affect your credit score

1. Paying your credit card late

Your payment history has the most significant impact on your credit score. To be exact, it makes up 35% of your credit score. Timely payments help build a positive credit score over time. Late payments will bring your credit score down very quickly.

The more delinquent your credit card becomes, the more it hurts your credit score. A single 30-day late payment won’t hurt your credit score as much as a 90-day late payment. Late payments continue to affect your credit score for seven years, as long they’re included on your credit report. They hurt your credit score less over time as long as you add more positive payment history to your credit report. After seven years, they won’t hurt your credit score at all.

2. Having a high or maxed out credit card balance

Your level of credit card debt is another important factor for your credit score. It’s 30% of your score. Your level of debt compares your credit card balances to your credit limit. The higher your score, the more points you tend to lose from "bad" actions. That's because the scoring formula is sensitive to any sign you're getting in over your head. Maxing out a credit card is considered one of those signs.

As your credit card balances grow beyond 30% of your credit limit, your credit score will begin to drop. A maxed out credit card can cost hundreds of credit score points, especially if you have a high credit score to begin with.

The good news is that you can recover credit score points lost from a high or maxed out credit card balance by paying the credit card balance below 10% of your credit limit.

You also should know that it typically doesn't matter to the formula if you carry a balance or pay off that maxed-out card as soon as you get your statement. What's usually reported to the credit bureaus is the balance on your last statement. Even if you pay the debt in full before the due date, the maxed-out card will hurt your score. .

Note that with the credit card industry reducing credit limits on large numbers of accounts, even those with good payment histories, this could significaltly affect your credit utilization. As this will result drop your credit score through no action on your part.

3. Letting your credit card get charged-off

Charged-off credit cards are one of the most devastating things that can happen to your credit score. A credit card gets charged off after 180 days of delinquent payments. Charge-offs are more difficult to recover from than a single late payment.

4. Closing a credit card

Closing a credit card is more likely to hurt your credit score than to help it. If you close a credit card with a balance, your credit score is going to drop because it looks like you’ve maxed out your credit card. That’s because credit issuers typically report a $0 credit limit on a closed credit card.

Even if the credit card has a $0 balance, closing it could still hurt your credit score depending on the balances on all your other credit cards. When the credit score calculation considers your level of debt, it looks at each credit card individually, then at your total credit cards and credit limits (credit utilization). When you close a credit card, it can drive up your total credit utilization and hurt your credit score.

It’s widely reported that closing an old credit card will hurt your credit score in terms of credit utilization, but that’s not true immediately. The credit bureau will continue to report an account closed in good standing for up to 10 years. It’s only after that point that the credit card will drop off your credit report and potentially hurt your credit score.

5. Opening a new credit card

The age of credit is 15% of your credit score. The credit scoring calculation uses the average age of all your credit card accounts. Anytime you open a new account, even a credit card, your average credit age will drop. Opening just one new credit card won’t devastate your credit score. However, the more new credit cards you open, the more your credit score will fall. So, open only one new credit card at a time.

6. Applying for too many credit cards at once

Each time you make an application for credit, an inquiry is placed on your credit report. Inquiries make up 10% of your credit score and can cost 70 to 80 points if you have a credit score in the 700s or 800s. The more credit cards you apply for, the more your credit score will hurt. These are counted individually unlike inquiries for a loan which if made with in a 14 day period, are considered as one.

When you’re on the market for a new credit card, avoid applying for several credit cards at once. Instead, compare credit card offers and choose one credit card to apply for.

If you’re denied for a credit card, wait before applying for another one. The credit card issuer will send a letter telling you the reasons you were denied. You can use this as an opportunity to review your free credit report to help you repair your credit and improve your chances at getting approved for your next credit card.

7. Not having a credit card at all

You can build your credit score without having a credit card, but you’ll be missing out on some credit score points. Ten percent of your credit score considers your mix of credit. That part of the credit score calculation is checking to see if you have experience with different types of credit – both credit cards and loans. Having a credit card and a loan can help you build a better credit score.

8. Collection of a debt

This is probably the second-most common offense, after a severe late payment. It can be triggered by unpaid medical bills, utilities and credit card debt, and they're all equal in terms of the impact on your score.

The entry will stay on for seven years, regardless of whether you pay it off, but you should still pay. Contact the original creditor immediately to work out an payment agreement before being contacted by a collector.

9. Settlement of a debt

But failing to pay what you owe a creditor will take a serious toll on your score. You've seen the ads by companies offering to help you settle your debt for less than you owe. It is better to do this yourself by calling and making an offer. Short sales, too, fall into this category. Settlements will stay on your file for seven years.

Also, you should know that the amount of debt your creditor "forgives" in a debt settlement solution is typically added to your taxable income. So you may save some money by settling a debt, but you'll give some of it back to Uncle Sam in higher taxes.

10. Public records that appear on your credit report

Bankruptcies, judgments, liens: All of these rank up there as some of the most damaging. Let's start with bankruptcy. There are two types of consumer filings - Chapter 7 and Chapter 13 - and both can stay on your record for up to 10 years.

A judgment occurs when you're sued and you lose in court. Typically, smaller debts like credit card and medical bills are picked up by the credit bureaus, says Ulzheimer. Pay up as soon as possible. It won't help your score, but an outstanding judgment can become a wage garnishment, and lenders don't want to see that on your report.A judgment shows you not only avoided your bills, the court had to get involved to make you pay the debt. While they both hurt your credit score, a paid judgment is better than an unpaid one.

Finally, a tax lien is filed by the federal government when a person owes taxes. Liens are different in that they can stay on your report indefinitely, until you pay in full. When you do, you can ask that it be removed.

Of these three, bankruptcies are the most damaging. In fact, they're likely to be the most harmful of this entire list.

Although a foreclosure is connected to a specific account, a bankruptcy spills over into all accounts and is considered to be the single worst thing that could happen to your credit score.

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