I think I might vomit if I have to read one more "10 steps to financial freedom in 2012" blog post. They all say the same things. Make a budget, track every penny you spend, build an emergency fund...blah, blah, blah! Don't get me wrong. Those are each important parts of personal finance, but aren't you bored of reading the same old stuff? I certainly am. So I'd like to take a different spin on things for my first post of 2012. Want to destroy your credit this year? Here's 10 ways to make it happen:
1. Cosign a mortgage for your 2nd cousin once removed
Cosigning any loan for a family member or friend is a huge risk. All it takes is one 30-day late payment for your credit scores to tank more than 100 points. If you think you're ready to be a cosigner, you should also be ready to treat the loan as if it were your own and make every payment if necessary.
2. Refurnish your living room with a "No Money Down 0% Interest Deal"
The salesman won't disclose this up front, but the financing he's offering you on that new living room set will likely kill your credit scores. Sure, the 0% interest till 2016 sounds nice, but the problem is the credit limit they'll offer you will probably be exactly the amount you need to charge the entire purchase to your new account. You'll go home with a new couch and chairs so you can vege out and watch college football, but your new credit card will already be maxed out and your credit utilization, which accounts for 30% of your FICO scores, will hit the roof.
3. Ignore all parking tickets and library fines
Your credit scores won't benefit from paying these puppies off on time, but your scores will plummet if one of your accounts gets turned over to a collection agency. Municipal governments are hurting for cash these days too, so they're also becoming more agressive in their collection efforts, even for very small accounts that used to get overlooked.
4. Walk away from your underwater home
It may feel liberating to leave the keys behind and walk away from your home that's now worth less than half what you paid, but a foreclosure on your credit reports could drop your scores over 150 points. Ouch.
5. Throw in the towel and file bankruptcy
File bankruptcy and you can kiss your good credit goodbye for a long, long time.
6. Get divorced
Your credit doesn't have to get trashed when going through a divorce, but it's quite common for the credit reports of both spouses to become littered with late payments, charge offs, collections, and even judgments before all is said and done.
7. Hire a debt settlement firm
I don't care what the guy on the infomercial said at 1:30 this morning, the truth is debt settlement won't immediately improve your credit scores. Pay a firm to settle your debts and you'll likely just end up spending more money you don't have to make your credit scores worse.
8. Apply for every retail credit card you're offered
I would have 35 credit cards in my wallet if I applied for every retail card I was pitched during the holidays. Retail credit cards not only come with low credit limits in most cases, which can have a negative effect on overall credit utilization, but your credit scores will also take a hit every time you apply and a hard inquiry appears on your credit reports.
9. Switch all your credit card payments from auto-pay to manual
It's no secret that payment history is the most important factor in your FICO scores. Switch all your rewards credit cards to manual payments and you'll eventually miss one or two due dates- I promise. Unfortunately, all it takes is a few late payments to really destroy the positive payment history that's taken you so long to build.
10. Swear off credit and close all your credit cards
You've got to use credit to have good credit. It's part of playing the game. Getting rid of all your revolving credit because you want to "stick it to the man" is a surefire way to prove you don't want to play the game any longer, and your FICO scores will promptly reflect your choice.