Analysis

Avoid These Mistakes That Are Silently Hurting Your Credit Score

The average American’s credit score is a 714. According to FICO, that falls into the “good” range.

But while there’s nothing wrong with having a credit score of 714, the reality is that raising your score could help you qualify for a loan more easily and at a more affordable rate. And part of raising your credit score is knowing what seemingly innocent behaviors could actually be damaging your score, like these.

1. Closing out old credit card accounts

When there’s a credit card you no longer use, you might assume that your best move is to close the account. After all, why keep it open if you don’t benefit from it? Doing so only means running the risk of your credit card number somehow getting into the wrong hands.

It’s easy to see why you’d think closing an old credit card would make sense. But the length of your credit history plays a role in calculating your credit score. So it can work to your benefit to keep older accounts open.

Now, if you have an older credit card that charges an annual fee and it really doesn’t benefit you, then in that case, closing it makes sense — even if your credit score temporarily takes a hit. But if you’re not losing out financially by keeping an older credit card account open, then you may be better off keeping that account active.

2. Applying for too many new credit cards in short order

When you see a string of credit card offers you want to capitalize on, you may be inclined to submit applications — even if that means applying for several credit cards within the same month or two. Unfortunately, though, that could hurt your credit score.

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Each time you apply for a new credit card, a hard inquiry is done on your credit record. That will generally only drag your score down by a few points. But while a single hard inquiry isn’t such a big deal, multiple hits can add up.

Also, when you apply for too many new credit cards at once, it can make it seem like you’re suddenly desperate for credit, even if that’s not the case and your main motivation is simply to snag a bunch of sign-up bonuses. A better bet is to space out credit card applications by at least three months; six months would be even better.

3. Only making your minimum credit card payments

Your payment history carries more weight than any other factor when calculating your credit score, so it’s extremely important that you pay all of your bills and debts on time. If you make your credit card payments on time, it reflects positively on you, even if you’re only paying the minimum amount you’re required to.

But over time, only making your minimum payments could harm your credit score. That’s because you’re likely to keep racking up interest and growing your balance rather than whittling it down. And too large a balance relative to your total credit limit could cause your score to drop in a serious way.

Plus, if you get into the habit of only making your minimum payments on your credit cards, you’re going to set yourself up to accrue loads of credit card interest. And why throw your money away on that when there are so many other important things you can use it for?

You may be aware that not paying bills or paying them very late can harm your credit score. But you may not have realized that these moves could be hurting your credit score, too. So now that you’re in the loop, try your best to avoid them at all costs.

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