Finances work in mysterious ways. Just when you thought you’ve got everything, or at least most of it, covered, something comes up to mess up your plans. When it comes to credit scores, the plethora of information on how to keep them to healthy levels may do more harm than good.
To make sure this doesn’t happen to you, check out these 11 mistakes most people make that are destroying their credit score and avoid these pitfalls like the plague. It’s the only way to keep your credit pristine!
Not Checking Your Credit Report For Inaccurate Information
It’s important to check your credit report every once in a while to make sure there aren’t any mistakes that might lower your score.
Missing A Payment
You might not see it as a big deal, but missing even one payment could drop your score by as much as 110 points and show up on your credit report for 7 years.
Maxing Out Your Credit Cards
According to financial experts, you should not use more than 30 percent of your available credit.
High Credit Utilization
Using too much credit across your accounts can also lower your credit score. Try to stick to 30 percent utilization, experts suggest.
Canceling an Unused Account
Canceling an unused account is closely tied to using too much credit. If you suddenly have less credit available, your credit utilization goes up while your credit score goes down.
Closing an Older Account
“Canceling an older credit card could have the effect of shortening your credit history, which is a major factor in your credit score”, explains Richard Best of DontPayFull.
Turning Down Credit Increases
Credit utilization is yet again the reason behind your credit score drop. A credit increase means you have more access to credit but that’s no reason to use it all.
Keeping a Balance
If you carry a balance, you have to pay interest and if it gets too expensive to pay, you could end up with unwanted debt. The best course of action is to pay the balance in full every time.
Disregarding Other Bills
Your rent, utility bill, phone bill, or even your medical bill could also affect your credit score, so make sure you pay them in due time.
Co-Signing a Loan
You might want to help a friend out, but think twice before saying yes to co-signing a loan as you will also “receive all the damage to your credit that comes from nonpayment of the debt”, warns Mike Sullivan, a personal finance consultant.
Allowing an Authorized User
You can help someone with poor credit to increase their credit score by allowing them to become authorized users on your credit card account. Unfortunately, it can backfire and affect your score in case of irresponsible usage on behalf of the other user.