Your credit score plays a big role in your life. It can determine your eligibility for an auto loan, reduce the security deposit amount you owe for an apartment or utilities, and help you qualify for certain jobs. If you’re not sure what your current score is, check for free using CreditKarma. Once you view your score, you’ll know how much you can and should do to keep raising it. The following five actions actually hurt your credit score, so avoid doing them as you improve your financial situation over time.
1. You Pay Your Bills Late or Miss Payments
Payment history accounts for a whopping 35% of your FICO Score, the credit score most lenders use. Pay your bills on time to prove that you’re reliable and a good credit risk.
To pay bills on time, schedule automatic bill payments or pay bills when you receive the statement. If you have outstanding debts, repay them oldest to newest. Consider becoming a gig worker to get ahead on your bills.
2. You Use as Much Credit as Possible
The amount of available credit you use versus your total credit limit makes up 30% of your FICO Score. Lenders look at your credit utilization ratio to see if you’re too reliant on credit and potentially unable to repay loans and bills.
Ideally, strive to use 10% to 30% of your available credit. Pay down your debts and resist the urge to open new credit accounts to improve your credit utilization ratio.
3. You Close Old Credit Accounts
The length of time you keep your credit accounts open contributes to 15% of your FICO Score. Close old accounts because you don’t use or need them anymore, and lenders think you don’t have a credit history and may be unable to manage loans.
Request a free copy of your credit report and review all of your open accounts. Keep the accounts with the longest history of excellent payments open. Because some creditors close accounts after 12 months of inactivity, charge at least one purchase annually.
4. You Open Only One Type of Credit Account
The types and mix of credit accounts you open supply 10% of your FICO Score. Your diverse credit portfolio demonstrates that you’re responsible to pay and manage a variety of credit products.
While it’s not a good idea to open dozens of credit accounts across categories, do mix things up. You can find financial benefits and view new accounts you can create now through Jobble Perks.
5. You Apply for Tons of New Debt
The number of recent credit accounts you open and hard inquiries from potential lenders make up 10% of your FICO Score. Lenders assume you have financial trouble or were denied credit if they see too many recent inquiries on your credit report.
Limit the amount of credit you apply for as you boost your credit score. Keep in mind that hard inquiries stay on your credit report for two years.
Strengthen Your Credit Score By Avoiding These Behaviors
If you earn a raise or want to invest your tax return refund or bonus into a new credit card or loan, be sure your actions improve rather than hurt your credit score and financial future.
About the Author: Jennifer Turner writes web content for a variety of clients. As a gig worker, she understands the benefits and challenges of the industry, which is why she prioritizes professional networking and daily self-care. Find her at WriterAccess.