Don’t let these factors knock points off your hard-earned credit score.

3 minute read

For years, you’ve honed your money management skills while working toward a respectable credit score. Maybe you’ve already attained a good or excellent credit score, or maybe you’re gradually edging closer to the score you want. Either way, the last thing you need is for your score to go down because you unwittingly allowed it to drop.

Your credit score is crucial when it comes to being accepted for credit cards with better benefits or rewards. You’ll also generally receive better interest rates on loans and credit cards with a score in the good-to-excellent range. So, it’s wise to do what you can to keep your credit score where you want it to be.

Below are four things that can lower your credit score short-term.

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1. Too many hard inquiries

When a lender or credit card company pulls your credit report, that’s known as a “hard inquiry.” One or two hard inquiries will have “an almost negligible effect” on your credit, maybe only lowering it five points or less, according to major credit bureau Experian. However, a large number of hard inquiries can make you look like a risky borrower and lower your credit score by several points.

At the same time, when several lenders for one type of credit such as a mortgage or auto loan pull your credit report within a short period, your credit score won’t necessarily drop. That’s because most credit scoring models lump those inquiries together and count them as a single inquiry – 45 days for FICO or 14 days for VantageScore, for example, according to Experian.

Even though hard inquiries can stay on your credit report for up to two years before they’re automatically removed, hard inquiries aren’t likely to affect your credit score for more than a year, according to Experian.

Find out: Time Heals These 4 Credit Score Wounds

2. Applying for multiple credit cards

You may want to have more available credit, but applying for a bunch of credit cards in a short period could have a detrimental effect on your credit score. That’s because each credit card company will pull your credit report, and that counts as a hard inquiry.

Applying for one card probably won’t have much effect on your credit score. But don’t get carried away, since too many hard inquiries can lower your score and stay on your credit report for up to two years.

Find out: 6 Ways to Get an 800 Credit Score Faster

3. Using too much available credit

If you diligently pay all your bills on time, but your credit drops by several points anyway, your credit utilization rate – the ratio of your revolving debt to available credit may be too high. Fortunately, raising your credit score, in this case, is an easy fix. Pay down your balances, and your rate should improve.

Your credit utilization ratio accounts for around 30% of your credit score. Experts recommend keeping the credit utilization rate below 30%. For example, if your total available credit is $10,000 and you have a $2,000 balance, your credit utilization ratio would be 20%.

Keeping your credit utilization ratio at 1% to 9% is even better for your score since higher ratios could cause lenders to see you as a bad credit risk who may have difficulty making payments.

Find out: 6 Reasons You Could Be Denied Even with Excellent Credit

4. Closing old credit card accounts

If you have an old credit card that you haven’t used recently, you may think that canceling the card and closing the account makes sense. Don’t be too quick to cut that card in half, though.  For one thing, you’ll lower the amount of credit that you have available, which can result in a higher credit utilization rate, lowering your credit score.

Another reason to hold off on canceling an older account is that the age of open accounts factors into your credit score. So, the more established accounts you have on your credit report, the better that is for your credit score.

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About the Author

Deb Hipp

Deb Hipp

Deb Hipp is a full-time freelance writer based in Kansas City, Mo. Deb went from being unable to get approved for a credit card or loan 20 years ago to having excellent credit today and becoming a homeowner. Deb learned her lessons about money the hard way. Now she wants to share them to help you pay down debt, fix your credit and quit being broke all the time. Deb's personal finance and credit articles have been published at Credit Karma and The Huffington Post.

Published by Debt.com, LLC