3 ways your debt could lead to bad credit FAST

Your credit standing probably isn’t the first thing on your mind most days. In fact, you might not even think about it at all until you need to borrow money. 

But as someone who struggled with bad credit for years, I can tell you this: those three-digit scores are pretty freaking important when you want access to funds—to buy a car or a home, or to cover another major expense. 

Carrying debt could turn good credit into bad if you're not careful. But it doesn’t happen overnight. If you understand how it can happen, you can keep your credit on the right track. 

Here are some of the biggest pitfalls to avoid with debt. 

1. Maxing out credit cards

If you don't know much about how credit scores work, here's a crash course. 

Your scores are based on information in your credit reports, which is like a report card for how you manage credit accounts, including credit cards. There are different factors that affect your scores, but a big one is how big your balance is compared to the credit limit on each card (this is called your credit utilization ratio in industry lingo).

Maxing out credit cards can cost you points. Not to mention, it can also cost you a lot of money in interest if you carry a balance and your cards have high APRs.

2. Falling behind on payments

Debt can do more damage to your credit when making monthly payments becomes a struggle. 

If you're trying to juggle multiple payments because you've got balances on five or six cards, for instance, it's a lot easier for something to slip through the cracks. Given that payment history carries the most weight for credit scoring, even one late payment could ding your scores. 

Letting late payments pile up can bring your scores down even more. The later a payment is, the more it hurts you. A charge-off can set the stage for even bigger credit score damage. A charge-off happens when you're so far behind on payments that your creditor decides to write the debt off (consider it uncollectible). And the debt doesn’t just go away. 

3. Ignoring a summons for credit card debt

When a debt goes unpaid, you might start getting phone calls or letters from your creditors asking you to pay. Eventually, your creditor might decide that the only way to get their money is to take you to court. 

If a creditor sues you and they win, the court judgment goes on your credit report. And having been through a credit card lawsuit in my 20s, I can tell you that does not look good. It certainly doesn't help your credit scores.

Plus, the harm doesn't stop at your credit reports. Once a creditor wins a suit against you, they can lay claim to your bank accounts or force your employer to send them a portion of each of your paychecks. That can lead to more financial headaches for you. 

If you receive a summons, answer it. It might be easier to work out a payment plan or negotiate the debt before the creditor gets a judgment against you.

Having debt doesn't have to mean being stuck with bad credit

If you're worried about debt tanking your credit scores, there are some things you can do about it. 

Get on a budget so you're less likely to overspend on credit cards. You can use a budgeting app like Achieve MoLO to track expenses so you always know where your money is going. If you’re paying down debt, try to use your credit cards less—or not at all. Using them erases some of your progress.

The next steps are to pay all of your bills on time and work on paying down what you owe. This is where you might need some outside help if you're already behind on payments or your debt has ballooned to an unmanageable amount. 

A professional debt consultant can review your financial situation and offer possible solutions for dealing with it. Solutions might include a debt consolidation loan to streamline payments, or debt debt resolution so that you can get a fresh start. Debt resolution means negotiating with your creditors to lower the amount you owe. Debt consolidation and debt resolution are both great strategies for getting debt under control so you can turn bad credit around.