There are many factors that cause bad credit. Some people may not realize the impact the certain decisions will have on their credit until it is too late. It is HIGHLY RECOMMENDED that you thoroughly read this section and place great importance on increasing your credit score/fico score because it will save you more money than any job promotion or side job that you could work at. For More information on how much bad credit can cost you, click here.

For starters the reasons your credit score will go down are: Inquiries, Late Payments, Charge Offs, Repossessions, Foreclosure, Judgments, and Bankruptcy.

Inquiries: Inquiries are caused by companies looking at your credit report for the possibility of issuing you credit. This may be from a credit card company, a mortgage company, or a utility company. Some companies don't place inquiries on your report, but it is rare. The way in which inquiries hurt your credit is that it take 30-60 days for credit to show up on a report, sometimes longer. A credit issuing company is very skeptical of someone who has applied to a lot of credit recently because they don't know what you were accepted for or not. For example, say you applied for 5 credit cards all at once and got all of them. You then have 5 new credit cards which haven't shown up on your credit report, yet the inquires have. So rather than risking giving another credit card to a customer and risking abuse, they would deny you for excessive inquires.

Solution: Inquiries usually fall off within 6-12 months and do not have a lasting affect on your credit. They are not negative marks, but more of an instant guide for the creditors to protect themselves from fraud.


Late Payments: Probably the most common of all bad marks on your credit, and the gateway to the serious credit marks, late payments are exactly what they say they are. It tells the credit agencies that you weren't able to pay your bills on time or forgot to send the payment in. Either way it tells the agency that you're a higher risk customer. This will cause your credit score to move down and will cost you more on your future home and car loans. The types of late payments are 30 days late, 60 days late, 90 days late and 120 days late. The later you are, the more it damages your credit. Late payments stay on your credit report for 7 years from last date reported.

Solution: Pay your bills on time! Do whatever it takes to pay any bill that has your credit tied to it on time. If you have late payments and would like to get the resolved, you make look into signing up for a credit repair service. These services challenge the bad listings and usually get them removed within 3 to 18 months, depending upon severity.