Damage to Credit Scores for Credit Card Debt

Your credit score is dependent upon numerous factors, and how you use your credit cards impacts many of them. While using a credit card wisely and responsibly can increase your credit score, using it irresponsibly is sure to lower your score. Knowing how a credit score is determined and what credit card actions will lower your score is important if you want to keep the best credit score possible.

Credit Score Factors

A person's credit score is based on several factors, such as the number and variety of credit accounts she has, the average length of those accounts, the percentage of her available credit she has used and her history in paying debt payments on time. Different companies use different calculations to compute credit scores, but certain activities typically damage a credit score regardless of the calculation used.

Late Payment

The largest factor, according to FICO, of any person's credit score is his history of bill payments. If you use a credit card and charge anything, even a small amount, and then later fail to pay the bill on time, this late payment will damage your credit score. Yahoo Finance reports that even a single late payment, regardless of the amount missed, can lower a FICO score by between 60 and 110 points.

Charging a Lot

When you use a credit card, it's important to keep the amount of the balance as low as possible if you don't want to damage your score. Yahoo Finance reports that maxing out a credit card, meaning carrying a balance equal to your credit limit, results in a 10- to 45-point loss to your credit score. Kiplinger reports that keeping your balance below about 20 percent of your available credit is the best way to ensure you do no damage to your score by using your card.

Settlement

While not paying back your bills is bad, agreeing with your credit card company to enter into a debt settlement program is even worse for your score. Yahoo Finance reports that any time you agree to a debt settlement, which is a situation in which the creditor agrees to accept less money than you actually owe, your score suffers dramatically. A person who agrees to a debt settlement can see her FICO score lowered by between 45 and 125 points.