When it comes to your credit score, it’s easy to think that anything you do won’t have a huge impact. Unfortunately, this is not the case. A bad credit score can have a significant impact on your life; it can affect your ability to get a loan, get a job, and everything else in between.
There are numerous ways you can be ruining your credit without even realizing it. In this article, we will discuss 6 of the most common ways people are unintentionally ruining their credit.
1. Maxing out Credit Cards
One of the most common mistakes people make is using too much of their credit limit. Not only does having a high balance lead to more spam in your mailbox, but it significantly impacts your credit score as well. When lenders look at your credit report, they want to see a healthy balance between your credit usage and your available credit. Having a high utilization rate, or a credit usage rate that is close to your total credit limit, means a potential lender could view you as a risky borrower.
2. Paying Bills Late
Another common mistake is paying your bills late. Late payments stay on your credit report for seven years and can have a major impact on your credit score. The late payment can also incur late fees and higher interest rates, so it’s important to pay attention to due dates and necessary payments.
3. Not Paying Credit Card Balances in Full
Paying only the minimum balance on your credit cards can mean that you’ll be carrying a balance on the card for months or even years, while accumulating interest at a high rate. Keeping up with paying your balance in full is important to maintaining good credit, so make sure you budget accordingly and pay off any balance as soon as possible.
4. Closing Old Credit Cards
Closing old credit cards can not only be inconvenient when you need to make purchases, but it can also be damaging for your credit score. Having multiple lines of credit can be beneficial for your credit, so closing an old credit card can diminish your “available credit” ratio and hurt your credit score.
5. Applying for Too Many Credit Cards
When you apply for a credit card, there is typically a “hard inquiry” on your credit report. A hard inquiry negatively impacts your credit score, as it is seen as a potential risk. Multiple hard inquiries are often seen as one single inquiry, so avoid putting in too many applications.
6. Failing to Monitor Your Credit
Lastly, not monitoring your credit on a regular basis is falling into a trap many people make. Not only should you monitor your credit report, but also monitoring your credit score and taking note of any sudden changes. If you notice any discrepancies, make sure you follow up right away so you can avoid any long-term credit damage.
Final Thoughts
Good credit is an important part of the overall foundation of your financial health and can have a lasting impact on all areas of your life. We have listed some of the most common ways people are unintentionally ruining their credit, from maxing out credit cards to not monitoring their credit report. Being aware of these behaviors can help you maintain a healthy credit score and avoid any unexpected financial surprises.
