Actions That Lower Your Credit Score
Maintaining a healthy credit score is important for your financial safety. You probably already know that late or missed payments on your credit card bills and loans can lower it, but there are other subtle yet still dangerous things you could be doing that may be jeopardizing your credit score as well. Here’s a list of the biggest ones, so that you can avoid these surprising actions that lower your credit score.
Opening too many new credit cards or loans
Credit history is important. Lenders like being able to trace your credit history back for many years because it gives them more information in order to construct a more accurate creditworthiness profile for you. Having good credit for an extended period of time is an obvious benefit. If you’re closing old credit cards and opening new ones, you’re likely hurting your credit score because it limits how much information lenders can access about you.
Using only one type of credit
Part of your credit score is based on the types of credit that you use. If you use multiple types of credit, from mortgages to credit cards and beyond, this indicates to a lender that you’re an experienced borrower and can responsibly handle loans.
Not using your credit
This might seem counterintuitive, but neglecting to use your credit can actually hurt your credit score. A good credit score comes from using your existing credit intelligently, not from abstaining from using it. You should regularly use your credit, such as by using your credit card for daily expenses. Make sure to pay off all of those balances though!
Using too much credit
This tip might seem obvious, but sometimes even if your balances don’t exceed your available credit, your credit score might be in jeopardy. If your balances get too close to your available credit (for example, if you have a $4000 balance but a $5000 credit card limit), this tells lenders that you’re cutting it a bit close and might lower your credit score. Keep your credit expenditures somewhere in the middle, and make sure you pay off your balance every month (or at least most of it).
Having wrong information on your credit report
While rare, errors can still pop up on your credit reports. Errors that can hurt your credit score include reports of late payments or unpaid loans that you never made. Even more common errors, like an incorrect address, can be annoying to deal with. It’s important to pull a report once a quarter and make sure all of your information is correct. You should also monitor your credit score to see if anything unusual happens. Most major credit card providers will give you your score if you ask.