Avoid these common credit mistakes to improve or maintain your credit score.

3 minute read

Whether you’re trying to improve your credit score or that rating is right where you want it to be, credit score mistakes can set you back temporarily, or maybe even long-term while you recover.

Fortunately, you can avoid lowering your credit score or staying stuck in the “fair” or “good” range when you’re aiming for “excellent.” Once you know the factors that comprise your credit score and any credit missteps that could be holding you back, you can take control of your finances, improve your credit score and avoid actions that hurt your credit.

Ready to bump up your credit score or keep the excellent credit rating you worked so hard to achieve? Avoid these five credit score mistakes to improve and protect your credit score.

1. Maxing out credit cards

Even when you’re making all credit card payments on time, carrying high credit card balances can negatively impact your credit score. That’s because your credit utilization rate — the percentage of total revolving debt you have to your total revolving credit limits — makes up 30 percent of your credit score.

For example, if your total credit card debt is $5,000, and the total of your credit limits is $10,000, your credit utilization rate would be 50 percent, which is too high and will likely lower your credit score.

To avoid this credit score mistake, pay off the statement balance of your credit cards each month. If that’s not possible, set a goal and make a plan to whittle those balances down as soon as you’re able.

2. Applying for credit too often

When you apply for a credit card, loan, or other types of credit, the creditor pulls your credit report, resulting in what’s known as a “hard inquiry” on your credit report. Having one or two hard inquiries here and there isn’t likely to drop your credit score.

When you apply for two, three, or more credit accounts over a few weeks or months, however,  the number of hard inquiries may lower your credit score by a few points.

To avoid this common credit score misstep, limit your credit applications to only the credit you need and resist the urge to apply for every lucrative credit card offer you find.

3. Closing credit card accounts you no longer use

You may be tempted to “clean up” your credit accounts by closing credit card accounts you’ve had for a while but no longer use. That’s a bad idea when it comes to your credit score, though.

Those older accounts are good for your credit score since the length of your credit history comprises around 15 percent of the score. So, avoid closing old credit card accounts, even if you never use them.

To keep the credit card issuer from lowering the card’s credit limit or canceling the card for nonuse, charge $10 or $15 on an older credit card at least once a year and then pay off the balance immediately.

4. Paying late (or not at all)

Paying a credit card or loan a few days late once or twice isn’t likely to lower your credit score. However, when you make late payments that exceed 30 days late, late payments can show up as negative credit history and lower your credit score.

Since credit history makes up 35 percent of your credit score, paying late is one of the worst things you can do for your credit.

To make sure your credit history is spotless, always pay credit card and loan payments by the due date listed on the credit account statement.

5. Becoming a cosigner on a credit card or loan

You may want to help someone with poor credit by cosigning on a car loan or adding a friend or one of your kids as an authorized user on your credit card. Those are risky endeavors for your credit score (and your relationship with that person), however.

That’s because if your friend, kid, or other relative pays late frequently or defaults on payments, you’re the one ultimately responsible for the amount owed and the effects of those late or missed payments on your credit history.

Instead of cosigning, do your friend a favor and advise them to save a few hundred dollars to work as a deposit on a secured credit card. With a secured credit card, the issuer restricts the credit limit to the amount of the deposit to reduce the credit card issuer’s risk.

Suggest the person with poor credit also meet with a credit counselor at a nonprofit credit counseling agency. The credit counselor can help them create a budget and/or debt payoff plan. The credit counselor can also help them create better money habits and suggest ways to improve their 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