It’s a lot easier to ruin a good credit score than improve a bad one. Boosting your score takes time and dedication, but some mistakes can quickly cause long-term issues with your credit.
Here are five of the most common credit fumbles you can make, and how to avoid them.
According to Rod Griffin, director of consumer education and awareness at Experian, payment history is the No. 1 factor that goes into calculating your credit score.
“The thing that will sink your credit score fastest is being late on your payments,” he said. “Strive to make all your payments on time, every time. If you have any past due accounts, you should bring those accounts current and make all payments on time going forward.”
For a credit bureau, a late payment means 30 days late — a full billing cycle. If you get behind a day or two, it should not affect your score, but you may be subject to penalties and late fees from your credit card company.
“Your goal should be to pay off your credit cards every month. If at all possible, pay the balance on the billing statement in full. This shows that the account is still active even if it has a zero balance,” he said.
Another quick way to damage your credit score is by overcharging credit cards with impulsive purchases.
“Impulse buying can hurt your credit score pretty quickly by running up your balances,” Griffin explained.
As your balance increases, so does your balance-to-limit ratio (or utilization rate), which is the second most important factor in credit score calculations. The amount of outstanding debt you’re currently making payments on also goes up, pulling your credit downward.
His advice: “You really want to be deliberate about how you use credit. Know what you’re charging, why and when you’re going to repay it. As a rule of thumb, you never want your balances to be more than 30 percent of your credit limit.”
Recent activity accounts for 10 percent of your credit score, so applying for too much credit all at once can cause your score to plummet.
“You don’t want to apply for multiple accounts to get credit because it looks like you are suddenly taking on a lot of new debt, which is scary for lenders,” he said.
But don’t worry, this rule applies primarily to credit cards and personal loans. Scoring systems recognize when you are shopping around for the best mortgage or auto loan rates.
When a credit card is paid off, it may seem reasonable to close the account. However, doing so can actually hurt your credit score.
“When you close an account, you lose the available limit on that account, so your scores will typically drop a bit. But after about two or three billing cycles, the scoring systems will adjust for that,” said Griffin. “If you're thinking about closing a credit card account, I always advise people to avoid applying for any new credit for the next three to six months.”
It’s also a good idea to avoid long spans of inactivity on your credit card accounts. If a card remains unused too long, the lender may request to close the account, so it’s a good idea to use it every couple of months to show activity.
“Knowledge is key to having a good credit score,” said Griffin. “Lack of knowledge may be the most serious challenge to most people around credit scores and credit reports. They just don't know what they should do or not do.”
You don’t have to be a credit expert, but having a basic understanding of how credit works and monitoring your score will naturally support your financial health.
“Getting your own report does not hurt credit scores,” he said. "You really should check your own report and know what’s in it. If people were to do that more often, they would be able to better own that process and control it.”