Question

youre holding the keys to a brand new car, longing for a cell phone upgrade and planning a trip to disney world. but wait....will doing these things affect your credit? determine how the scenarios below might impact your credit score. (remember—it can go up or down.) justify your reasoning and offer a solution to any negative impacts.
scenario 1:
you want to purchase a new vehicle and you have your heart set on a brand new suv. you take out a loan to pay for the car, but after six months you begin to fall behind on payments and incur late fees.
does your credit score go up or down?
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why does it go up or down?
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if your score goes down, how can you fix it?
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Explanation:

Credit scores are influenced by payment history. Falling behind on loan payments (as in Scenario 1) is a negative factor. Late payments are reported to credit bureaus, and this negative mark on payment history (a significant component of credit - scoring models like FICO) causes the score to drop.
To fix a lower credit score due to late car loan payments:

• First, catch up on the missed payments as soon as possible. This shows lenders that the delinquency was a temporary issue.
• Then, set up automatic payments or reminders to ensure future payments are on time. Consistently on - time payments over an extended period (usually 6 - 12 months or more, depending on the severity of the initial late payments) can start to repair the damage to the credit score.

Answer:

• Does your credit score go up or down? Down.
• Why does it go up or down? Because late payments (falling behind on loan payments) negatively impact the payment history component of the credit - scoring model.
• If your score goes down, how can you fix it? Catch up on missed payments and establish a pattern of consistent on - time payments.