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Credit scores determine so much the financial life of a person. Its purpose is to determine the likelihood of repayment of a debt by an individual, but this could just as well serve as an adult grade report card. Many people face major difficulties with credit score issues, including smart people who are successful and economically strong (like the ones mentioned here).
As these credit score horror stories show, it's easy to bring down those crucial numbers with an honest mistake or a simple oversight.
Here is how simple mistakes of a moving day or a honeymoon can persist in your financial records months later.
Early repayment of my debt reduced my credit score from 40 to 50 points
When it comes to credit ratings, it's helpful to read the fine print.
"About nine years ago, I was about to buy a house and take out a mortgage," said Matt Schmidt, CEO of Diabetes Life Solutions. He decided to pay off his student loan debt earlier than expected, which seemed like a good idea at the time.
This seemingly responsible behavior has turned against us.
"My student loan was my only type of" installment debt. "Even though I paid off my debt, FICO penalized me for not having installment debt, Schmidt said.
This penalty had a fairly serious impact on the credit score.
"My credit score dropped by 40 to 50 points and it took about four months to bring it back to its current level," said Schmidt. This delayed the purchase of his house four to five months.
"Obviously, I would never have thought that being responsible and paying off a debt would have a negative impact on my credit score."
An oversight of my honeymoon cost me dear in credit points
"After my wedding, my wife and I spent our honeymoon in Argentina," said James Garvey, CEO of Self Lender. "In my checklist, I've set up all my bills on automatic payment – or at least I thought so." But the newlyweds were shocked when they returned home.
One of Garvey's alleged automatic credit cards proved to be unpaid for two months.
"As a result, my credit score has been damaged for years.After this experience, I created a company to help people responsibly develop their credit and save money, Self Lender . "
Garvey is another person who has turned a rough experience with credit scores into an opportunity to educate others.
Read more: Advantages and disadvantages of configuring automatic bill payment
My credit fell to 500 after a missed payment
"My education in finance and building my credit was favored when my credit dropped to $ 500 after a missed payment on a student loan," said Lisa Fox, SproutCents' financial advisor. The total impact of this missed single payment, however, becomes more complicated.
"Because my student loan provider has 19 individual loans on each loan, the amount on my credit is 19 missed payments," said Fox. The financial repercussions have been serious and lasting.
"My score dropped and it took a few years before it disappeared from my credit report and things balance out," Fox said. "I learned the hard way to consolidate your loans and pay on time." Now, Fox is working to help others achieve financial stability.
A lost box on the day of the move cost me several credit points
It is so easy that important things get lost during a move, and sometimes it can even hurt your financial credit.
"One of my scores crashed several years ago after our move," said Liz Weston, personal finance columnist for NerdWallet, CFP, and author of the book "Your Credit Score".
"A library book was boxed and stowed, and the latest notices (along with several other letters, including a 401 (k) check) were sent to the wrong address," said Weston.
Of course, moving is stressful and tedious, so this oversight has gone unnoticed for a while.
"By the time I understood all this, my TransUnion credit report had a collection and my FICO score had dropped by more than 50 points."
Like everyone else on the list, Weston is out of the credit situation.
"Paying the collection did not help, but the time (finally) did," said Weston.
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