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10 Mistakes You Don’t Realize are Ruining Your Credit Score

Is your credit score stagnant, in bad shape, or does it keep getting worse but you just can’t figure out why? We all know you need to pay your bills on time and we all know maxing out your card is a bad idea, but do you know all of the other ways you can damage your score? Check out the 10 credit mistakes that you might be making without even realizing it.

Want to know what your debt is doing to your credit score? Check out this article to find out.

10 Common Credit Score Mistakes

#1 You close old credit card accounts

If you’re spring cleaning and are feeling like a cleaning machine, you may suddenly decide to start cleaning up your finances while you’re at it. You’re getting rid of things you don’t use in your home so why not get rid of the credit cards you no longer use? The problem is that unlike throwing away your old pair of sneakers, canceling old credit cards can damage your credit score.

In the world of finances, old credit is the best credit. If you cancel an old card you risk removing the years of good credit you’ve built up. It might not tank your score but you’ve earned that good credit! You deserve to have it count in your score. You may want to consider keeping old cards open.

What U Should Do: If you absolutely need to close the account, follow the procedure the credit company has laid out. Once the card has been closed, carefully monitor your credit score to make sure that the process was properly documented.

#2 Shopping too long for the best rate

When you’re looking for a student loan, an auto loan, or a mortgage it is smart to look around for the best rate. FICO encourages you to rate shop so if you find a loan within 30 days the inquiries won’t affect your score. Any longer than that can have a negative impact on your score so don’t drag your feet when rate shopping!

What U Should Do: Look for a loan within the recommended 30 day time frame.

#3 Too much debt too fast

The perils of giving a teenager a credit card are well documented in many teen flicks. Obviously giving an irresponsible young person a credit card they are not ready for and don’t respect is a mistake. But even a responsible young person can do damage to their credit score if they don’t take great care to pace themselves.10 Mistakes You Don’t Realize are Ruining Your Credit Score

If a credit card user lands into debt right out of the gate that can impact their score for years. New credit card users need to understand how to use their cards responsibly right out of the gate so they don’t end up with credit score regret.

What U Should Do: Avoid going into debt where you can. However, if you’re already in debt or if debt is unavoidable, focus on paying down the debt with the highest interest rate and take a more aggressive stance on budgeting. 

#4 Paying rent late

We all know that paying your bills late can negatively impact your credit score but were you aware of the impact paying your rent late can have? When you are late paying rent, landlords can report that to credit bureaus which can damage your score. Not every landlord will do this, but it’s a substantial risk.

What U Should Do: If you are renting make sure that you and your roommates are consistently paying rent on time to avoid any potential credit score issues.

#5 Not alerting creditors if you have changed names or moved

This one might not seem like that big of a deal but credit scores require all of your information to be up-to-date. Your credit history is tied to your full legal name. Eliminate the potential for confusion and keep your credit information current.

What U Should Do: If your name changes or if you move, alert your creditors who will notify credit reporting agencies. Once you’ve alerted your creditor, monitor your credit score to make sure that everything was updated properly.

#6 Not using credit at all

It’s admirable if you want be responsible with your credit card and only use it in emergencies or for specific purchases. You may think that this will protect you from credit card debt which will in turn protect your score. However, this is one circumstance where you can be too cautious. If you aren’t using your credit card you aren’t generating any credit history. There will be nothing to show credit bureaus about your ability to make payments.

What U Should Do: If you’re very concerned about making credit card payments, use your credit card regularly for smaller purchases that you know that you can pay off easily.

#7 Over-utilization of your available credit card limits

While not using your credit at all can do damage – you can also mess up your credit score if you are using credit too much. Over-utilization can be a tricky one. Many people think that as long as they’re never maxing out their card and are regularly paying their card off then they are fine.

But it’s important to understand that credit bureaus expect you to only use a portion of your available credit every month. If you are using too much of your credit, even if you are paying it off, it will negatively impact your score.

What U Should Do: On average you want to aim for using only 30% of your monthly available credit. When you find yourself using your credit card to much consider switching to cash or your debit card instead.

#8 Co-signing a loan

Co-signing a loan or credit line is a quick way to do some serious damage to your credit score. The status of a loan you cosign shows up on our credit report. When you cosign a loan you are entering into a legal agreement that makes you responsible for loan payments. If the person you co-signed for has a bad habit of making late payments – or even worse not paying at all – this will damage not just their score your score as well. Learn the dangers of giving out personal loans.

What U Should Do: If your co-signee defaults on their loan you are legally responsible for paying it off. If you can’t, you are putting your credit score at serious risk. It might be best to avoid co-signing for loans altogether to make sure that your credit score remains under your control.

#9 Not checking your credit reports regularly

It is important that you regularly check your credit reports. Your credit report shows your credit history so you can see where you are making good financial decisions and where you could be doing better. Checking your credit score can make you a smarter spender.

It’s also important to check your credit report for errors. If there is incorrect information on your report it can negatively impact your score. The longer you wait to address errors the harder it is to get them corrected.

What U Should Do: Set a specific date and time every few weeks to check your credit report so it becomes a habit. 

#10 Not paying traffic tickets

As if getting a traffic ticket isn’t bad enough – did you know that unpaid traffic tickets can hurt your credit score? A ticket is a debt that you owe not unlike credit card debt. Debt makes up 30% of your credit score. Your payment history makes up 35% of your score. So if you have outstanding debt and your payment history has a missed payment, your score will suffer for it.

This doesn’t mean that every time you get a ticket you’ll hurt your credit score. It’s just something to keep in mind if you think you can avoid paying for it.

What U Should Do: If you get a ticket, don’t wait, pay it off right away. 

Get Your Credit Score Back on Track

Now that you know how to protect yourself from credit mistakes you didn’t realize you were making, start putting your good score to good use! Union Community Bank offers a variety of credit card options to fit your personal needs. At Union, we are invested in you and work hard to set you up for success.

Visit your local branch and speak to a Trusted Advisor to find out how to get your credit on the right track.

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