7 Things That Can Damage Your Credit Score


A blonde woman holds her head in frustration as she leans over a desk full of work materials.

Understanding the ways to lower your credit score can help you avoid them.

What you don’t know can hurt your credit score. Discover these seven ways to hurt your credit score and tips to prevent them in the future.

Late payments

Promptness of payments accounts for a significant part of your credit score. Making late payments on credit cards, home, auto and other loans can quickly lower your score. Remember to pay your bills on time every month.

Using too much available credit

Credit utilization refers to the amount of credit you’ve tapped compared to your total available credit. For example, if your credit cards have a combined limit of $12,000 and you owe $6,000 on those accounts, you’ve utilized 50% of your credit. Credit experts advise keeping your credit utilization under 30% to maximize your credit score.

Applying for several credit cards in a short period

Each application for a credit card results in a hard inquiry on your credit report. Several inquiries in a short period can have a negative impact on your credit score. A sudden need for additional credit can make it appear that you’re a high-risk borrower. Limit the number of cards for which you apply.

Cancelling cards

While cancelling cards might seem like a smart move, it can actually damage your credit score. When you cancel a card, your total available credit is lowered. Even if what you owe remains the same, your credit utilization ratio goes up.

Sometimes it’s necessary to cancel a card due to high annual fees or in the case of a separation or divorce. If you must cancel a card, make sure it has a $0 balance before you close the account. If you’re seeking a card with no annual fee, check out some of the competitive options available with a Consumers credit card.

Co-signing a credit card or loan application

Only co-sign on another person’s loan or credit card after careful consideration. As a co-applicant, the credit and payment information for that credit card or loan will show up on your credit report. If a vehicle is repossessed or an account is sent to collections, it will hurt your credit.

Having no credit activity

Credit scores are continually recalculated. If you don’t have any credit activity, then there isn’t any current information for the reporting agencies to use to evaluate your credit worthiness.

Also, some credit card accounts are cancelled by lenders when they are considered inactive. To keep your cards active, use them at least once every few months. You might also keep cards active by using them for recurring expenses like monthly subscriptions. Pay the cards off in full and on time to help benefit your credit score.

Bills sent to collections

If a bill is sent to collections, your credit score will definitely take a hit. Typically, bills are sent to collections when they are 120 days past due. Any account sent to collections will typically show up on your credit report for seven years.

It’s better to work with a lender to work out a payment plan than to have your account turned over to collections. Call the lender as soon as you realize you have a problem with repayment.

Paying bills on time, keeping credit utilization under 30%, avoiding unnecessary credit applications are three of the best ways to establish and improve your credit score.

Consumers provides banking services for more than 130,000 members. If you have banking questions, call us at 800-991-2221. We make it easy to bank how you want, when you want.

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