Even if you do your best to maintain a high credit score, you could run into trouble at some point in the future. Worse yet, it’s possible you could make a mistake without knowing what you’re doing.
There are a variety of mistakes that can drag down your credit score, with these five among the most common:
- Late payments. You don’t need anyone to tell you that late payments are bad for your credit score. When you neglect to pay on time, it shows that you’re a bigger credit risk. Subsequently, your score will dip. Just how far depends on things such as how long it took you to finally send your payment, and how frequently you’re paying after the due date.
- Closing a credit card account. This sounds like the right thing to do if you’re no longer using a card, but it can actually damage your credit score. Here’s why: a long credit history can do wonders for your credit score. If you get rid of a card, your history goes out the window.
- Debt settlement. At some point, you may realize you don’t have the money to pay a balance in full (such as one associated with a credit card). This may lead you to reach a settlement with your lender. While this brings immediate benefits to your life, it can also result in a deficiency balance on your credit report.
- Too many inquiries in a short period of time. There’s nothing wrong with comparing lenders and credit cards before making a final decision, but you don’t want to go overboard. Too many inquiries in a short period of time can ding your credit score.
- High balance on your credit cards. Even if you aren’t able to payoff your credit card balance every month, you should do your best to keep your balance as low as possible. Over-utilization of your credit can harm your score.
One or more of these common mistakes could be killing your credit score. Fortunately, if you eliminate these from your financial life you’ll find it much easier to maintain a high score and benefit as a result.
