Understanding exactly what is hurting your credit score can be difficult. The truth is that even seemingly small things can have a profound effect on your score.
FICO credit scores are the most widely used scores by lenders, and typically range from 300 to 850. They're calculated from information in your credit report — including whether you've paid accounts on time, how much you owe, how long you've had credit, what types of credit you have and how many new accounts you have. Although there are five main factors used to figure out your credit score, there are countless ways to screw it up.
"There's a lot of things you could be doing wrong," said credit coach Jeanne Kelly. "Most of the time, the people who come to me don't even realize what they've done wrong."
Whether you want to increase your credit score or repair credit issues of the past, knowing what can trip you up can help ensure you don't hurt your credit score.
1. You Pay Your Bills Late
Your payment history has the biggest impact on your credit score, according to Jason Stewart of CreditSoup. "As the sole purpose of a credit score is to indicate how likely you are to repay your debt, it makes sense to look at how often you pay your bills on time," he said. "Your payment history is the most influential part of your credit score, and one missed or late payment can torpedo an otherwise stellar score."
U.S. News & World Report estimated that a single late payment can lower a credit score by 100 points or more. However, borrowers might be able to mitigate the damage, assuming they act fast. While missing a payment by just a few days likely won't put your scores at risk, paying bills 30 or more days late can have a serious effect on your credit.
How to avoid it: Do whatever is necessary to avoid being late on payments. If you are forgetful, set up reminders on your phone or computer. If you spend too much, tighten your belt so you'll have the cash to make your payment.
How to fix it: If you paid a bill late, contact your lender to get its policy on reporting late payments. Unfortunately, if the lender has already reported the late payment, you probably won't be able to get it removed from your credit report. You'll just have to make sure all future payments are made on time.
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2. You Have Too Many Credit Cards
Keeping too many credit cards open at one time can be problematic, even if you pay each of them off monthly. "Having too many cards can negatively impact both your credit score and your ability to borrow money," said Julie Pukas, head of U.S. bankcard and merchant services at TD Bank. Even if you don't use all your available credit, lenders might wonder what would happen if you did max out your cards.
How to avoid it: "Having three to five credit cards is usually not a problem," Pukas said. "But if you find your credit card balances are increasing, that's a danger signal." She advised limiting the amount of available credit you have at any one time.
How to fix it: If your ratio gets too high, consider closing one of your newer credit accounts to keep your utilization ratio low and your credit history long.
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3. You Carry High Balances on Your Credit Cards
After payment history, the amount you owe is the second-most-important factor in your credit score, according to myFICO, the consumer division of FICO. Owing money doesn't necessarily lower your score, but using a high percentage of your available credit can.
Remember that a high credit utilization ratio can hurt your credit score and make lenders think you're a high-risk borrower. Consumers with the best credit scores use 10 percent or less of their available credit, Kelly said.
How to avoid it: "There is no absolute 'right' answer to how much of your credit limit you should be utilizing," Pukas said. "What's more important to note is that, if you're carrying balances on credit cards that exceed 50 percent of the available credit, then you're hurting your credit score."
How to fix it: "Strive to get your total credit utilization under 50 percent first and then keep going," Pukas said. "This is one of the fastest ways to increase your credit score."
4. You Don’t Have Any Credit Cards
Lenders like to see a long history of responsible credit use, and if you don't have a card, you might not have much information to show. Although it seems counterintuitive, not having any credit cards can actually hurt your credit score as much as having too many.
You might be cheering if you've paid off your mortgage or other loans and buy things only with cash now. But if you apply for a home loan, you might find that you can't get a loan because you've stopped using credit, Kelly said. If you think you'll be applying for credit at any point in the future, you need to continue using credit to show recent activity on your credit report.
How to avoid it: If you don't want to open your own credit card account, consider asking a friend or family member to add you as an authorized user. You won't have to use the card for it to benefit your credit score — you'll simply piggyback off the good credit habits of someone else. Having a credit card can benefit your credit, Kelly said, because your score is based, in part, on how many types of credit you have and how well you manage those accounts.
How to fix it: Becoming an authorized user on someone else's card can also help you repair credit mistakes. Just make sure the person who adds you to a credit account is a responsible borrower. After all, her bad borrowing behavior can also show up on your credit report.
5. You Close Old or Inactive Credit Cards
Although it's smart to limit the number of credit cards you have at any given time, Pukas noted that closing old or inactive cards can come back to haunt your credit score. "The length of your credit history affects 15 percent of your score," she said. "This is why it's important not to close credit card accounts that you have had for years."
How to avoid it: Strive to keep older credit cards active by using them sparingly — once every few months — and paying off the balances on time.
How to fix it: If you don't trust yourself not to rack up debt on those cards, "consider canceling newer accounts rather than old ones, so that the length of your credit history is not impacted," Pukas said.
6. You Ask for a Higher Credit Limit
Even though your credit card issuer checked your credit when you applied for your card, it will likely check it again if you ask for a higher credit limit. This could be reported as a credit inquiry, which could affect your score, said Gerri Detweiler, a credit expert and head of market education for Nav, which helps business owners manage their credit.
How to avoid it: If at all possible, try to spend well within your current credit limit. That way, you won't put your credit at risk.
How to fix it: This doesn't mean you shouldn't ask for a higher limit — especially if you're responsible with credit and don't plan to charge your card to the max. But you should think twice about doing so before applying for a mortgage or other loan.
7. You Consolidate Debt Onto One Card
If you owe money on several credit cards, you might be tempted to consolidate debt by transferring all the balances to one new card. But that can be a mistake. Not only can this lower the average age of your credit history, especially if you choose to close out the other cards, but it can also increase your debt-to-credit ratio.
How to avoid it: To keep your score from dropping, make sure the debt you consolidate doesn't exceed 50 percent of the available credit on the new card.
How to fix it: Charge purchases to a few different credit cards and keep the debt-to-credit ratios of each below around 20 percent. According to the credit reporting agency Experian, individuals with consolidated debt might want to consult a nonprofit credit counseling company about participating in a debt management plan.
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8. You Pay Off All Your Cards at Once
Paying down high balances can help improve your credit score. But if you pay down all of your balances at once, your score could take a hit, said credit expert John Ulzheimer, formerly of FICO. "This one is a bit tricky, but sometimes consumers will wind up with no activity on any card, and they see their scores go down," Detweiler said.
How to avoid it: FICO wants to see recent activity on revolving accounts, such as credit cards. If you don't have any utilization, your score can be affected. The impact is small, though, Detweiler said.
How to fix it: If you decide not to close credit accounts to keep your credit utilization ratio low, don't shove those cards in a drawer and never use them again. "If you use them, it can help your credit because it's showing activity on an account," Kelly said. She rotates the cards she uses to keep them all active and pays the balances to avoid racking up interest.
9. You Use the Wrong Credit Card
You have to be careful about which card you use when making big purchases. For example, if you buy a $1,000 television using a retailer's card with a $1,000 limit, "you've just maxed out your card," Ulzheimer said. If you put it on another card with a $30,000 limit and low utilization, it wouldn't impact your score, he said.
But by using all of the available credit on one card — especially if it's your only card — your credit score could drop 50 points or more, Ulzheimer said.
How to avoid it: Make sure if you have a choice of cards that you use one that won't be maxed out. And don't apply for a retailer's card just to get a discount if the limit on that card will be close to the amount you're charging.
How to fix it: Bring your account balance down below the 50 percent threshold as soon as possible.
10. You Co-Sign on Debt
Co-signing for family or friends on their credit cards, car loans, residential leases and cellphone plans can be a quick way to ruin strong credit scores, said Ian Atkins, head of finance at Fit Small Business.
"This can impact you negatively in two ways," Atkins said. "First, that debt obligation can immediately show up on your credit report, and the higher debt load can impact your credit score. Second, if your friend or family member doesn't make their payments, those missed payments will show up on your credit report. If the account eventually goes to collections, that too will show up on your credit report."
How to avoid it: "You should be very careful when co-signing for friends or family," said Atkins. If you do co-sign, make sure you can cover the monthly payments if necessary, he said. Also, closely monitor the account to make sure no missed payments occur.
How to fix it: If you co-signed on another borrower's debt and it's having a negative impact on your credit, try to get the other person to refinance the debt in his name only. If that's not an option, you might need to suck it up and take over the payments. It's a painful lesson, but you won't soon forget why in most cases, you should never co-sign on debt.
11. You Have an Off-Balance Credit Mix
Your credit "mix" refers to the variety of credit types you have on your report and accounts for about 10 percent of your FICO score. When you only have one type of credit on your report — such as credit cards — it's likely your scores will suffer due to lack of information.
That doesn't mean you need to open several accounts you won't use. But Kelly said you should have at least one credit card and keep it active by using it to pay utility bills, gas or other regular expenses — and then pay it in full each month. Also, consider getting a rewards card so you can earn cash back or points for free travel.
How to avoid it: The ideal credit mix varies, but a healthy balance might feature a credit card, a student loan, a mortgage and a line of credit. This diversity of credit shows lenders you can manage several different types of credit in a responsible way.
How to fix it: If you need to improve your credit mix, try diversifying the types of credit you have by adding a new type to your profile. Credit scores might dip when you first open a new line of credit, but they will rise again after about five regular payments, according to a CreditCards.com report.
12. You Pay Down the Wrong Debt First
Paying down your balances can improve your credit score. How much of an improvement you see depends on which debt you pay.
For example, you won't see much of an increase in your score if you pay off an auto loan, Kelly said. That's because the credit utilization on installment loans, such as car loans, isn't weighed as heavily in credit scoring as your utilization of revolving credit.
How to avoid it: If you have a choice of which debt to tackle, "pay down credit cards first to boost your score," Kelly said.
How to fix it: There isn't harm done in paying off debt, just opportunities passed up. Pay off credit card debt at the next opportunity.
13. You Don’t Fix Credit Report Mistakes
If you see a mistake on your credit report, you have to take steps to fix it — and follow up to make sure it's remedied. Otherwise, the error will remain on your report and might hurt your credit score.
Contact the credit bureau that issued the report that contains the mistake and ask the bureau to investigate it, Kelly said. Also send a letter to the credit issuer — such as the bank or credit card company — that provided the incorrect information to the credit bureau to let it know you're disputing that information.
How to avoid it: It's tough to avoid this situation — after all, a mistake is just that, an error. However, once you discover the mistake, jump on it right away.
How to fix it: Always check the accuracy of the information on your credit report. According to the Fair Credit Reporting Act, credit bureaus are required to correct or remove inaccurate information. Start by sending a letter to the lender and each of the three credit reporting agencies — Experian, Equifax and TransUnion — stating the date the payment was due and the date it was made. For best results, include all supporting documentation and an explanation of the error.
14. You Make Too Many Credit Inquiries
Multiple credit inquiries in a short period can have a long effect on your record. "Applying for credit too often is problematic for a variety of reasons," Ulzheimer said.
For starters, unwanted inquiries will appear on your credit report or reports. "That's where most people believe it ends," Ulzheimer said. "But the real problem with applying for credit too often is adding a bunch of new accounts to your credit reports, which lowers the average age of your accounts. That metric is actually more valuable than the impact of inquiries."
How to avoid it: The current credit scoring system allows consumers to shop for similar types of loans, such as auto financing, in a short period of time without the inquiries being reported as multiple applications.
How to fix it: As long as you manage current credit accounts well, your credit score should bounce back within three months of the last inquiry.
15. You Have Negative Records
Negative records such as collection accounts and late payments typically remain on your credit report for up to seven years from the date of first delinquency, Pukas said. "Paying off the account sooner doesn't mean it's deleted from your credit report," she said. "Instead, it's listed as 'paid.'"
How to avoid it: Paying your bills on time and keeping credit card balances low will help you maintain healthy credit records.
How to fix it: Unfortunately, it's difficult to remove negative records from your credit report. "Of course, it's smart to pay your debts, both to reduce the total amount of debt you owe and to show your willingness to repay your obligations," Pukas said. "But expect the negative record to have some effect until it is purged from your report."
16. You Have Unpaid Parking Tickets
Some cities now contact a collection agency when a parking ticket is not paid on time. A $35 expired-meter ticket can turn into a $500 problem that could plague your credit history for years.
How to avoid it: Feed that meter and pay all your parking tickets on time.
How to fix it: If your unpaid tickets have already gone to collections, you'll have to deal with the agency in question to resolve the issue. Because collection agencies buy debt for pennies on the dollar, you can usually negotiate a lower price to mark the collection as paid. However, this doesn't mean the information will come off your credit report — it can stay there for up to seven years.
In some cases, offering to pay a bill in full can prompt the agency to remove the debt from your credit report. If you want to go this route, draft a goodwill letter requesting that the lender remove the negative information.
17. You Have Overdue Library Fines
Believe it or not, a $5 library fine can have a negative impact on your financial health. While many libraries overlook these small fees, some cash-strapped institutions send overdue book fines to collections.
How to avoid it: Many libraries offer e-book rentals straight from their websites. With e-books, you won't have to worry about turning books in on time. If you still prefer to check out traditional books, set a reminder on your phone so you know when it's time to return your loaners.
How to fix it: If your library fines go to a collection agency, they might show up on your credit report. Your best bet to fix this credit mistake is to pay the collection agency and send a letter to the library begging forgiveness and asking it to remove the item from your credit report.
18. You Have Court Judgments
Judgments are issues of public record that show up on your credit report and that can lower your overall score. Unfortunately, these debts can be tough to resolve.
How to avoid it: Of course, the best way to avoid court judgments is to pay bills on time. If the debt was settled long ago but is still on your credit report, consider contacting the court in question to confirm that it has updated the records.
How to fix it: Generally, consumers need to take their cases to an appeals court if they want to reverse judgments. "Judgments can remain on your credit reports for seven years from the date the judgment was filed," Ulzheimer said. "Even paying a judgment won't cause it to be removed. The only legitimate way to get a judgment removed is if it is vacated."
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19. You Pay Your Rent Late
Paying your rent on time might not help your credit score, but paying it late can certainly hurt. If your landlord grows frustrated with your late payments, he can report you to the credit bureaus.
How to avoid it: Some landlords allow tenants to pay half their rent on the first day of the month and the other half on the 15th day. This type of arrangement can help you avoid paying a huge bill at the top of the month.
How to fix it: To avoid the bad habit of paying rent late, ask your landlord if you can change the due date. Choosing a date closer to payday can make it easier to meet your obligations. If the building owner won't work with you, find more affordable housing, get a roommate or even land a side job to increase your income.
20. You Carry Medical Debt
Medical debt can remain on your credit report for seven years from the date the medical debt originally went into default, Ulzheimer said. "The good news, however, is that medical collections that have a zero balance are not considered by FICO and VantageScore's newest scoring models," he said.
How to avoid it: While you can't prevent medical issues from occurring, you can take steps to prevent them from impacting your scores. Anywhere from 50 percent to 80 percent of medical bills have errors, according to U.S. News & World Report. If you receive a high medical bill in the mail, take the time to review the information and identify any mistakes. If your bill is accurate and you can't afford to pay, try negotiating the balance with a medical billing manager. Or ask the hospital if it offers a financial assistance program.
How to fix it: Talk to your insurance company. "Medical debt that is in collections might eventually have to come off your credit report if it has been paid or is being paid by your insurance," said Ulzheimer. "This is the result of a settlement agreement between the credit reporting agencies and the attorneys general from 32 states."
21. You Don’t Pay Your Taxes
If you don't pay your taxes, the issue isn't just between you and the government. When you owe back taxes, the government can place a tax lien on your property, an act that lowers your credit score.
How to avoid it: To avoid taking a credit hit and encountering hefty fees, file your taxes on time each year. If you can't afford to pay the balance, work with the IRS to set up a monthly payment plan.
How to fix it: If the tax deadline is approaching and you have yet to submit tax information, consider filing for an extension. You can also work with a tax professional to repay back taxes before they affect your credit score.
22. You Fail to Build Your Own Credit After Marriage
Consumers often neglect to consider the ways in which a spouse's credit behavior could affect their own scores. Individuals maintain separate credit reports after marriage. However, if you and your partner share one or more joint accounts, any delinquencies are likely to impact both of you. Additionally, couples often make the mistake of relying too heavily on one partner's good credit.
How to avoid it: If one spouse has better credit, the other might be inclined to let that person take on all the debt. However, borrowing money in only one partner's name can leave the other spouse with a flimsy credit history that limits her ability to secure loans after a death or divorce. For this reason, it's important that both spouses take on some amount of debt.
How to fix it: If your credit history is on the light side, consider taking out a credit card or loan in your name and making dutiful payments. Additionally, newly married spouses who change their last names should review their credit records to ensure all information is transferred accurately.
23. You Think a Divorce Decree Eliminates Your Debt
You might reach an agreement with your ex-spouse in your divorce settlement that he or she is supposed to pay off joint account balances. However, if your name is still on the account and it doesn't get paid, your credit score could take a hit in divorce. "As far as your credit, that divorce decree removes nothing," Kelly said.
How to avoid it: During a divorce, pull your credit report, highlight any joint credit accounts and, if possible, remove your name from the ones that your spouse has agreed to pay, Kelly said.
How to fix it: Continue to check joint accounts to make sure your ex is paying bills on time.
24. You Let Debt Go to Collections
If you miss several payments, your debt could be turned over to a collection agency. You might even have a debt in collection you're unaware of, such as an old utility bill that wasn't paid when you moved. If that collection account is reported, your credit score could tumble.
"I have seen it drop in a credit score 75 points for one collection," Kelly said. A collection account will stay on your report for seven years, even if you pay it off.
How to avoid it: Make payments on time, or reach out to the debt-holders for repayment assistance.
How to fix it: If you do get a letter from a collection agency for a debt you owe, try to pay what you owe as soon as possible so that it's less likely to be reported. And check your credit report to make sure you don't have any debts in collection that need to be paid.
25. You Have Charge-Offs on Your Report
When a debt goes unpaid for a long time, the company that reported the unpaid bill might mark it as a charge-off, thereby indicating it was unable to collect the debt. Like other debts, charge-offs can have a negative impact on your credit score.
How to avoid it: Most debt types don't get marked as charge-offs until they are four to six months late, according to Detweiler. If you have any outstanding debts, pay them quickly to avoid this kind of mark on your credit report.
How to fix it: Unfortunately, paying a charge-off doesn't make the information disappear from your credit report. The item will stay on your record for up to seven years after it gets reported.
26. The Bank Forecloses on Your Home
Along with suffering the pain and stress of losing a home, people who experience foreclosure will likely see their credit scores drop. How much your score falls depends on your credit history prior to the foreclosure and other factors. However, the effects of a foreclosure can stay on your credit report for up to seven years from the filing date.
How to avoid it: If you're having a hard time paying the mortgage, call your lender right away. Or you might get help through your state's housing agency. Consumers should beware of foreclosure scams and contact the Federal Trade Commission with questions.
How to fix it: Repairing your credit after a foreclosure is a slow process. While foreclosure isn't as damaging as traditional bankruptcy, consumers should expect to have limited access to credit for several years. Use that time to pay bills regularly and keep credit card balances low.
27. You File for Bankruptcy
Your credit score will drop significantly if you file for bankruptcy — 100 points or more, according to myFICO. Chapter 7 and 11 bankruptcies can stay on a credit report for up to 10 years.
If you do file for bankruptcy, you should check your credit report to make sure the accounts included in the bankruptcy show a balance of zero. Keep track of when you filed so you know when to expect the bankruptcy to fall off your report.
How to avoid it: If you can't afford to make your monthly debt payments, call your creditors to see if you can negotiate a plan with smaller payments. This could help you avoid missing payments altogether and hurting your credit score.
How to fix it: You need to start re-establishing a credit history after bankruptcy, and choosing to avoid credit after a bankruptcy can backfire. "When you do nothing after a bankruptcy, the credit score stays low," Kelly said. Instead, get a secured credit card — which will have a credit limit based on an amount you deposit with the credit issuer — to rebuild healthy credit, she said.
Cameron Huddleston contributed reporting to this story.