Almost everyone has had blemishes on his or her credit history at some point. In these tough economic times, this is more common than ever. Maybe you have had to let payments slip past 30 days or maxed out a credit card or two to bridge the gap between paychecks. You might have had to file for bankruptcy or been foreclosed on. Whatever happens, everyone has had to go through it, but what does it cost them?

How much do mistakes cost?

One of the problems many people encounter is that they do not know how bad a credit hit they will take with a given action. For instance, a lot of people don’t know the damage a late payment on the car or mortgage might do. They might be unaware of what will happen to their score after a debt settlement. As if that weren’t enough, the same mistakes hurt some people more than others. There appears to be no consistency and no way to predict the effects of a given action. Not knowing the facts and so forth make it hard to make good decisions in hard times.

The air has cleared

Finally, FICO has shed some light for the public on just how their credit is affected by common credit mistakes. FICO has recently made public its guidelines for point reductions in credit scores for given offenses: bankruptcy, 30 day late payments, debt settlements, foreclosures, and maxing out credit cards, for example. The formula tends to hurt people with higher scores worse than those with lower scores. For instance, a 680 score holder might get between 10 and 30 points taken off for a maxed out credit card. If you have a score of 780 – you lucky devil – the damage is between 25 and 45 points.

Big mistakes equal big reductions

As one would assume, the greater the problem the bigger the point reduction is from your credit score. The higher your score is, the more damage is done by mistakes. The biggest deductions are for foreclosure and bankruptcy. Foreclosure takes off 85 to 105 points from a 680 score. If the score is 780 the foreclosure will cost between 140 and 160 points. Bankruptcy ratchets things up a notch with a 130-150 point reduction for a 680 score and 220-240 for a 780 score.

Settlements can cost you, too

Foreclosure and bankruptcy seem like obvious problems that would cost points on a score. A significant deduction that isn’t so obvious is a debt settlement. You might think you’re getting everything back on track if you settle debt for a percentage of the total. However, they may take a larger credit score hit than anticipated. FICO lists debt settlement as a 45-65 point deduction for a 680 score and a 105-125 point deduction for a 780 score; compare this to a 60-80 point and a 90-110 point deduction respectively for a 30 day late payment. If nothing else, people know what they’re getting into if thinking about settling or paying late.

Work hard to keep what you have

Looking at the penalties, one can see how important it is to keep good credit once you have it. The penalties are higher for better scores emphasizing the need to retain a high rating. The fall is precipitous, but the climb back up is longer and more arduous.