Good credit is one of the most important resources you can have. A good credit score takes time, consistency, and discipline to build. But it can dissolve in a heartbeat. Avoid these 10 mistakes that will ruin your credit.
10. Late Payments
Payment history is one of the main factors credit agencies use to determine your credit score. Almost everyone makes a late payment once. In most cases, a late payment or two will not significantly damage your credit. However, any more late payments than that will begin to add up, harming your credit score.
9. Reaching Your Credit Limit
You may have a certain credit limit, but don’t spend until you reach it. A large factor in calculating your credit score is your debt utilization ratio. In other words, the amount of available credit you’re using. Running up credit debt beyond 50% of your limit starts affecting your credit score. Try to stay between 10-30% of your credit limit.
8. Accumulating Credit Card Debt Early in Life
Most people get their first credit card after high school or while a college student. It’s important to start your credit history right. Keep your debt utilization ratio between 10-30% of your credit limit. Your past history counts for as much as 35% of your credit score. Getting too much debt too early in life hurts your credit.
7. Closing Credit Accounts
Up to one-third of your credit score is based on your debt utilization ratio. It’s best not to close credit accounts because they increase your overall available credit. If you have to close an account, close newer accounts first. Older accounts have longer credit histories. Credit history counts for 15% of your credit score.
6. Applying for New Credit Accounts Often
Applying for new credit accounts or cards often can harm your credit score. Every official inquiry that is made on your credit report presents a new opportunity to earn a point against you. Multiple inquiries might be viewed as a red flag that indicates a credit history with mistakes and problems.
5. Missing or Ignoring Errors on Your Credit Report
It’s important to check your credit report periodically to look for any inaccuracies. You can check your credit for free each year (one time per each of the 3 major credit agencies) at AnnualCreditReport.com. Check once every four months. If you find a mistake or error on your report, contact the credit bureaus and initiate the process of correcting them.
4. Bouncing a Payment or Check
Bouncing a check or automatic payment, that is, having it denied for insufficient funds, risks having the failed transaction reported to a collection agency. Such a report will impact your ability to obtain future lines of payment. Don’t write a check if the funds are there. Stop automatic payments beforehand and contact whoever you owe and ask about an extension.
3. Paying Your Rent Late
You may think everything’s okay when sending your rent in a little late, as long as you make the payment. However, many landlords still report slightly late rent payments. And if you don’t pay your rent for 30 days, it can lower your credit score. Getting close to an eviction notice will also hurt your credit score.
Read More: How Prepaid Credit Cards Protect Your Identity
2. Borrowing Money to Boost Your Credit Score
There are services and schemes promoting themselves as credit score boosters. Avoid them at all costs. These quick schemes don’t go unnoticed and will cost you one way or the other. You don’t have to carry a monthly balance to be creditworthy. Keeping your debt utilization ratio below 30% and making payments on time will improve your credit score.
Read More: 15 Ways to Improve Your Credit Score
1. Not Alerting Creditors of a Name Change
If you get married or change your name for any other reason, it’s crucial to alert your creditors immediately. First, it can result in credit report inaccuracies. Don’t assume your Social Security number will automatically connect you. It doesn’t. Your credit is connected by many factors. Errors and inaccuracies can harm your long-established good credit history and score.
Read More: 5 Easy Tips to Improve Your Credit Score
