5 Things You Do That Ruin Your Credit Score

by Connie Mei · 8 comments

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We all know that our credit score is very important when it comes to our financial health. When you’re applying for a loan, your credit score can be the deciding factor in not just getting the funding or not, but the number also dictates how much interest you ultimately have to pay. Yet, many people don’t have a clue how their credit score is affected. Do you?

There are many factors that go into your credit score, including payment history and credit-to-debt ratio. And you might not even realize it but many things you do every day affect these factors. Sometimes, we hurt our credit scores without even knowing it. Here are five things you might be doing that are ruining your credit score:

Late Payments
One of the most important (if not the most important) factor in determining your credit score is your payment history. There are many components of your payment history, including types of accounts, time left unpaid, and amount overdue. It is a complex calculation but just remember this at the end of the day: pay your bills on time. This is true for credit card bills even if you are just paying the minimum amount due. Never let a bill be overdue and your credit score won’t be adversely affected.

Closing Old Credit Cards
A key component to your credit score is your credit history. If you have a long history of good credit, your credit score will reflect positively. However, this credit history can be damaged if you suddenly close your old credit cards. Even though these cards may have been in good standing, your credit history will seem shorter. Be careful when closing credit cards, especially older ones.

High Credit Utilization
Be mindful of how much credit you are actually using at any given point in time, as your credit score takes into account your debt-to-credit ratio. For instance, if you have considerably more debt compared to available credit, this may be a poor indicator of your future performance, which will in turn lower your credit score. This is also why you don’t want to close older credit cards if you can help it, as having more credit cards means you have more available credit and that in turn will lower your debt-to-credit ratio.

Applying for Too Many Cards
Have you ever been persuaded to open a store credit card because of a promotion or deal? Maybe it’s a 0% balance transfer deal and you want to get in on the action. Many have, but you should think twice before you apply for another one. Whenever you open a new credit card, they check your credit report. Many requests for your credit in quick succession can lower the score altogether. That’s why all mortgage brokers will advice you not to try opening credit cards during the mortgage application process because suddenly opening credit cards in quick succession is a quick way to get your mortgage request denied.

Letting Accounts Go to Collections
In some instances, you forget to pay bills not because you don’t have the funds but simply because you forgot about the bill. Don’t let this happen. If you let an account go to a collection agency, this will adversely affect your credit score. Something as simple as an overdue library fee can knock points off your score. Be organized and stay on top of your due dates for your bills.

Your credit score is a tricky number that can be affected by many things. You have control over all of it, though. Don’t let little issues turn into bigger ones down the road. Keeping a high credit score is easier than rebuilding a low one, so stay alert and enjoy low-interest rates when you need access to credit.

What are some things you have accidentally done that had a negative effect on your credit score?

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  • David T says:

    Great advice. I took my grandads advice and never applied for credit until aged 32, although it served me well in the fact I’ve never had any debt, but when it came to wanting a mortgage to buy my own house, the bank told me clearly, I’d need a credit history. 12 months after my first of 4 applications I finally got a credit card with extortionate interest. I paid it monthly for 12 months and have never paid a penny in interest, 2 months ago I was accepted on another and my has credit rating has soared! I just need to finish saving for the mortgage deposit and that’s my first step complete on my way to financial freedom!

    Great article, thanks for sharing.

    • David @ MoneyNing.com says:

      I’m so glad you were finally able to build credit. I have a similar but slightly different story. I had credit cards growing up but then I grew up in Canada, so I basically had an empty credit profile when I came to the States in my 20s.

      I had trouble getting any type of service (I had to pay cash as a deposit just to get a cell phone contract!) but I eventually got a secured card at a bank that’s more like a prepaid credit card. 12 months later with full payments and I was finally able to get approved for a normal credit card.

      It takes work and it just goes to show that you need to start a credit profile early even if you don’t want any debt.

  • Johnny says:

    I would just add that although you’re fully correct that every time you apply for a credit card your score is dinged (due to the hard inquiry required as part of the application process), that ding only lasts for a maximum of 12 months and the inquiries are fully removed from your score after 2 years.

    • David @ MoneyNing.com says:

      Thanks for the additional insight. 2 years is a pretty long time though, so I still caution folks to think carefully before they apply for a new line of credit like a credit card.

  • Connie says:

    You forgot one. Not having any debt! There are mortgage companies out there that will loan to people who have no debt and no credit score, but who do not have enough money to purchase a home. We have no credit score, but we also have no debt and we save up and pay cash for all of our purchases, big and little. Instead of a car payment, we pay ourselves every month to save up to buy our next car. We have paid off our mortgage and if and when we move, we will pay cash for our next home.

    • David @ MoneyNing.com says:

      Good for you Connie. Paying cash is a show of strength!

      Just so you know though, you actually have a credit score (everybody does). It may or may not be high because you don’t have much on your credit report (since you have no loans open) but there is something in there 🙂

  • Nate Matherson says:

    Helpful article!
    Sadly, many Millennials like myself aren’t even building credit. There have been a number of recent studies showing that Millennials are actually become credit adverse. Something like 35% of college students have credit cards.. down dramatically from the pre-2008 financial crisis.

    Thanks for posting! Will share.

    • David @ MoneyNing.com says:

      Thanks for chiming in Nate. I don’t see 35% is that low of a number because these are, after all, college students. They’ll have plenty of time to build their credits once they land a job and I’m sure they won’t miss that credit card payment!

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