12 Things You Do That Can Mess Up Your Credit Score

It can be challenging to figure out what is causing your credit score to suffer. The truth is that even seemingly minor details can have a significant impact on your overall score.

Lenders most commonly utilize FICO credit ratings, ranging from 300 to 850. This score is based on data from your credit report, such as whether you’ve paid your bills on time, how much you owe, how long you’ve had credit, what sorts of credit you have, and how many new accounts you have. Although your credit score is calculated using five essential elements, there are several ways to mess it up.

“There are a lot of things you may be doing wrong,” said Jeanne Kelly, a credit coach. “The majority of the time, the people who come to me have no idea what they’ve done wrong.”

Knowing what can trip you up can help guarantee you don’t ruin your credit score, whether you’re trying to improve your credit score or fix credit concerns from the past.

You’ve never looked at your credit report before.

It’s too easy to forget or be too stressed to check your credit score. Some people believe that ignorance is bliss. Unfortunately, their blissful ignorance will end when they wish to buy their first house, car, or apartment.

This is one of the most common mistakes people make, and it’s also one of the easiest to avoid. Checking your credit score will notify you if there is any fraud associated with your name, show you your credit score, and inform you of any other issues that need to be addressed.

You’re lazy when it comes to paying your bills.

Your payment history heavily influences your credit score. According to U.S. News & World Report, A single late payment can reduce a credit score by 100 points. On the other hand, Borrowers may be able to limit the damage if they act quickly.

How to avoid it: Do everything you can to avoid being late with your payments. Set up reminders on your phone or computer if you are prone to forgetfulness. If you overspend, tighten your belt to ensure that you have enough money to make your payment.

How to repair it: If you paid a bill late, contact your lender to find out how late payments are reported. Unfortunately, you won’t be able to get the late payment deleted from your credit record if the lender has already reported it.

You have an excessive number of credit cards.

Even if you pay off each credit card regularly, having too many open credit cards can be dangerous. “Having too many cards can hurt your credit score and your ability to borrow money,” said Julie Pukas, TD Bank’s head of commercial product integration. Even if you don’t utilize all of your available credit, lenders may be concerned about what might happen if you did.

How to avoid it: According to Pukas, “having three to five credit cards is usually not an issue.” “However, if you notice that your credit card amounts are rising, it’s a warning flag.” She suggested restricting the quantity of credit you have available at any given time.

You have a lot of debt on your credit cards.

According to myFICO, the consumer subsidiary of FICO, the amount you owe is the second-most-important component in your credit score after payment history. Although owing money does not always result in a worse credit score, using a large percentage of your available credit does.

Remember that having a high credit utilization ratio can lower your credit score and make lenders believe you’re a high-risk borrower. According to Kelly, consumers with the best credit ratings use 10% or less of their available credit.

Stay away from it: “There is no one-size-fits-all solution to how much of your credit limit you should use,” Pukas said. “What’s more important to remember is that if you have credit card balances that exceed 50% of your available credit, you’re damaging your credit score.”

You aren’t in control of any credit cards.

Lenders prefer to see a long history of prudent credit usage, and if you don’t have a credit card, you may not have much to show. Despite what you would think, not having any credit cards can affect your credit score just as much as having too many.

If you’ve paid off your home or other loans and are now only buying items with cash, you may be ecstatic. However, if you apply for a home loan, you may find that you cannot obtain one because you have stopped using credit, according to Kelly. If you expect to apply for credit in the future, you should continue to use credit to demonstrate recent activity on your credit report.

You won’t have to use the card to boost your credit score; you’ll benefit from someone else’s good credit habits. According to Kelly, having a credit card can help your credit because your credit score depends on how many different types of credit you have and how effectively you handle those accounts.

You close credit cards that are no longer active or have been inactive for a long time.

Although it’s a good idea to keep the number of credit cards you have on hand to a minimum. According to Pukas, canceling outdated or inactive cards can hurt your credit score. “The length of your credit history accounts for 15% of your credit score,” she explained. This is why it’s critical not to close credit card accounts that have been open for a long time.

Avoid it by using older credit cards rarely — once every few months — and paying off balances promptly.

You want a credit limit increase.

Even if your credit card issuer ran a credit check when you applied for the card, it would undoubtedly do so again if you requested a greater credit limit. According to Gerri Detweiler, a credit expert, and education director at Nav.

Avoiding it: Spend as little as possible under your current credit limit. That way, you won’t jeopardize your credit.

You consolidate your debts onto a single credit card.

If you have debt on numerous credit cards, you may be tempted to consolidate your debt by transferring all of your balances to a single new card. However, this could be a mistake.

To avoid reducing your credit score, make sure the debt you combine does not surpass 50 percent of the new card’s available credit.

You pay off all of your credit cards at the same time.

Paying off high-interest debt can help you raise your credit score. However, if you pay off all of your debts at once, your credit score may suffer. According to credit expert John Ulzheimer, previously FICO.

“This one is a little problematic,” Detweiler said, “but sometimes consumers will finish up with no activity on any card, and their scores will go down.”

To avoid this, FICO wants to observe current activity on revolving accounts, such as credit cards. However, according to Detweiler, the influence is minor.

You Make a Mistake and Use the Wrong Credit Card

When making large purchases, you must be cautious about which card you use. If you buy a $1,000 television with a $1,000 limit on a retailer’s card. “you’ve just maxed out your card,” Ulzheimer said. He said it wouldn’t affect your score if you put it on another card with a $30,000 maximum and minimal utilization.

However, Ulzheimer warns against putting all your available credit on one card. Especially if it’s your only card — it might lower your credit score by 50 points or more.

How to avoid it: If you have a choice of cards, make sure you choose one that will not be maxed out. Also, if the retailer’s card limit is near the amount you’re billing. Please don’t apply for it only to obtain a discount.

You Co-Sign a Debt Agreement

According to Ian Atkins, general manager of Fit Small Business, co-signing for relatives or friends on credit cards, car loans, home leases, and mobile plans can be a quick way to damage good credit.

“This can have a detrimental influence on you in two ways,” Atkins explained. “First, that debt obligation may appear on your credit record right away. And a bigger debt load may have an impact on your credit score. Second, if your friend or family member fails to pay, the missed payments will appear on your credit record. If the account goes to collections, that will also appear on your credit record.”

Avoiding it: “When co-signing for friends or relatives, you should be very careful,” advised Atkins. Once you decide to co-sign, make sure you can afford the monthly payments if they become due, he advised. Also, keep a constant eye on the account to ensure that no payments are missing.

You’ve got an unbalanced credit mix.

Your credit “mix” refers to the different types of credit on your report. And it contributes to roughly 10% of your FICO score. You have only one sort of credit on your report, such as credit cards. Your score is likely to decline due to the absence of information.

That isn’t to say you should create multiple accounts you won’t utilize. However, Kelly recommends having at least one credit card.

Stay away from it: A healthy credit mix may include a credit card or a student loan. A mortgage, and a line of credit, among other things. This credit diversity demonstrates to lenders that you can responsibly manage various credit types.

You start by paying off the bad debt.

Your credit score can be improved by paying off your debts. The amount of progress you see is determined by which debt you pay off.

If you pay off an auto loan, Kelly says you won’t see much of a boost in your credit score. Because installment loans, such as vehicle loans. Although your credit utilization on installment loans isn’t considered as severely in credit score as revolving credit isn’t as important.

To avoid it: If you have a choice, Kelly recommends paying off credit cards first to improve your credit score.

How to solve it: Paying off debt has no negative consequences, resulting in missed opportunities. Pay off credit card debt as soon as possible.