7 Behaviors That Hurt Your Credit Score

Was your housing rental application recently denied? Did your new cell phone provider require a hefty deposit? It might have something to do with your credit health. Like other creditors, property management companies and cell phone carriers need assurance that you’ll meet your financial obligations, regardless of how much money you earn. Poor credit scores often result in credit denials or require larger deposits. 

So, before you submit another credit application, understand the behaviors impacting your credit score and the actions you can take to improve your credit rating.

1) Making Late Payments

Payment history determines 35% of your FICO® Score. Late payments signal high risk to potential creditors. Even one 30-day late payment can hurt your credit score.  On-time payments are essential to good credit health. 

Bring past due accounts current. Sign up for automatic bill pay using your checking account to make sure future payments arrive on time. 

2) Ignoring Collection Activity 

You might think credit cards and loans are the only accounts reported to collection agencies. But, unpaid debt, including delinquent medical bills, cell phone bills, and utility services, are also subject to collection activity. When a creditor sells your past due account to a collection agency, the debt will appear as a negative new account on your credit history report. 

Pay your bills on time, every time, regardless of bill type.

3) Maxing Out Credit Lines

Credit accounts at or near credit limits contribute to poor credit scores. A high credit utilization rate may mean you’re relying too much on credit and heading toward financial trouble. Potential creditors are hesitant to lend money or approve services to applicants who are financially overextended. Pay down balances and keep them below 30% of the available credit limit to see an improvement in your credit score. 

4) Skipping an Annual Credit Report Review

If you never miss a credit payment and keep credit balances low, you may still have a low credit score. Inaccurate information in your credit history reports can cause your score to plummet. Data reporting errors or attempted identity theft may produce a low credit score, even if you’re exhibiting responsible credit behaviors. The only way you’ll know for sure is to examine each one of your credit history reports at least annually.

Request free copies of your reports from Experian, Equifax, and TransUnion by visiting AnnualCreditReport.com. Review each report for accuracy and follow the dispute process provided by each bureau to have errors removed. 

5) Closing Credit Accounts

If you’re thinking about closing an account you opened five years ago, but no longer use, consider keeping it open. When you close accounts, it impacts the length of credit history. Longer credit histories provide potential creditors with confidence in your ability to repay debt obligations over an extended period of time.

6) Relying on a Single Major Credit Card to Build Your Credit 

How well you handle a variety of credit obligations can affect your score. Besides a credit card, a healthy credit mix might include an auto loan, personal loan, and retail store accounts. But, don’t rush to open new accounts to improve your credit score since the credit mix may have less of an impact than other factors. Your credit mix may have more or less influence depending on how much additional information is available to access your overall credit risk. 

7) Opening Multiple New Accounts

Multiple credit accounts opened during a short window of time can lower your credit score. While new credit has a small impact on your score, limiting the number of new credit accounts can also help avoid unnecessary debt. Similar to a mix of credit accounts, new credit has less of an impact on your credit score if there’s other information available to calculate credit risk. 

Improving your credit score takes time. Responsible credit usage focuses on paying bills as agreed and keeping credit usage low. Adopting healthy credit behaviors now can make it easier to maintain a good credit score and build the financial future of your dreams.