8 Surprising Things That Can Hurt Your Credit Score
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Written by
Caitlyn Moorhead
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Edited by
Levi Leidy
These days, it feels like bills can pile much faster than your cash can flow, which typically means that your credit card is getting an intense workout every month. Using your cards regularly can be sustainable and even rewarding, but when it comes to keeping your credit score in good standing, you may need to educate yourself on more than just the basics of paying your bills on time or keeping your balance low.
Beyond the obvious, there are lesser-known factors that can quietly chip away at your score and put cracks in your payment history. Little sneaky habits that can affect your credit score, sometimes without you even realizing it. Here are eight surprising things that can hurt your credit score and what you can do to avoid them.
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1. Closing Old Credit Accounts
It might feel smart to declutter your finances by closing unused credit cards. It’s just one less thing to put through the payment processor mill or accidentally max out, right?
Unfortunately, not necessarily, and doing so can hurt your credit. Though this may feel counterintuitive, when you close an account, it not only reduces your overall available credit but also shortens the credit history that you’ve been building, which makes up an estimated 15% of your FICO score. In addition, this move can spike your credit utilization ratio.
To avoid dinging your credit score, keep older accounts open unless they have high fees or are at risk of fraud. This way, your history stays intact and you have an alternative payment method in a pinch.
2. Co-Signing Loans
One of the biggest credit card errors, though it may feel helpful at the time, is generously offering to co-sign a loan with either a friend or family member. Yes, you want to be able to lend a hand to someone you care about who needs it, but did you know that if they default or fail to make payments on time, it unquestionably hurts your score?
Yes, being helpful is a noble trait, but co-signing a loan may be too generous, as you’re putting your credit at risk. Instead, consider only co-signing if you’re prepared to take full responsibility for the debt.
3. Just Making Minimum Payments
You’re doing what you can and paying off the minimum balance of your credit card each month, so you should be fine, right? Well, while making the minimum payment keeps your account in good standing, it does little to reduce your debt. High balances, especially those with high interest rates, can negatively impact your credit utilization, which makes up a significant portion of your score.
Just because only the minimum is due doesn’t mean your good credit doesn’t have an expiration date. Aim to pay more than the minimum, or if possible, the full amount, to lower your balances and improve your score. Paying off your credit card bills in total and on time each month is also the best way to significantly boost your credit score.
4. Giving Yourself Too Much Credit (at Once)
Applying for multiple credit cards at once comes off as a panic move in the eyes of creditors. Each time you try for a new credit card or loan and fill out the application, a hard inquiry is added to your credit report. Too many inquiries in a short period can make lenders view you as a higher risk.
If you’re shopping around for a new card, make sure to pace out credit applications and only apply when necessary. This will also help you slow down and find the card that best fits your finances.
5. Ignoring Your Small Bills
Unpaid utility bills, parking tickets or even library fines can be sent to collections. Once they are, they can cause significant credit damage, not to mention the hounding phone calls. Many people don’t realize that these seemingly minor debts can end up on their credit reports. When it comes to credit card companies, it’s not about the amount; it’s about getting paid, and they are sticklers for collecting what is owed.
To avoid the onslaught of IOUs, set up reminders or autopay for small recurring bills, and don’t let them slip through the cracks. Just one missed payment can surprisingly hurt your credit score.
6. Renting a Car or Hotel With a Debit Card
Though using your debit card for big expenses, such as rental cars or hotel stays, can keep you from maxing out a credit card, it can also weirdly hurt your credit overall. Using a debit card in these ways often requires the company to perform a credit check.
You may be noticing a pattern at this point, because where there are checks, there are often pitfalls for your credit card balance. In other words, some of these checks can be hard pulls, which might temporarily lower your credit score. Rather than swiping your debit, make sure to use a credit card instead for these types of transactions to avoid unnecessary credit checks.
7. Not Having a Mix of Credit
Once again, it would appear that you are a more desirable candidate for good credit if you have a wide variety of debt. This may feel wrong, but having just one type of credit on record, such as only having credit cards or just a massive amount of student loans you’re paying off, can limit your score potential.
Credit scoring models reward consumers who responsibly manage a variety of credit types, including installment loans and revolving credit. If appropriate, consider diversifying your credit portfolio with a mix of accounts.
8. Forgetting About Old Debts
Just because you forgot about an old debt, unfortunately, doesn’t mean so did your credit report. Unpaid debts can remain on your report for up to seven years and damage your score the entire time. To stop this credit-ruining train in its tracks, make sure you regularly check your credit report to catch and resolve any lingering or forgotten accounts.
Takeaway
The bottom line is that your credit score is a key part of your financial health, and sometimes the things that affect it most are the ones you least expect. By staying aware of these often-overlooked factors and taking proactive steps to protect your credit, you’ll be better positioned to maintain a strong and resilient financial profile that any creditor would be happy to report on.
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