Many don’t know what their credit score is, many don’t know how to have a good credit score, and many just have an overall negative attitude about them.
This doesn’t have to be true for you, though.
I believe a credit score can be used to a person’s advantage. A good credit score can help you earn great rewards through credit cards, it can help you get certain jobs, it can help you buy your dream home, and more.
Related article: How Your Credit Score Affects Your Life + Credit Sesame Review
Plus, the great thing is that it doesn’t have to be hard to increase your credit score.
However, it can sometimes be easy to ruin your credit score if you’re not careful.
Below are four ways you may be preventing yourself from having a good credit score.
1. You spend too much on your credit cards.
If you have a credit card, you have a credit limit. However, just because you are given this limit doesn’t mean you should try to reach it.
In fact, you should always try to be below 30% of your credit limit if you want to have a good credit score. So, if your credit limit is $1,000, you do not want to spend more than $300 as this can impact your credit score.
It’s also important to note that even if you are paying your balance in full each month that going over 30% of your credit limit can still negatively impact you. This is because your balance is reported on a monthly basis to the credit bureaus. In this case, it is best to pay off your balance or at least some of it before your next credit card statement goes live so that your utilization rate stays low.
2. You cancel old credit cards.
According to FICO, 15% of your credit score is from the length of your credit history. The longer your credit history then the higher your score may be.
If you have old credit cards that carry no annual fee, you may want to think twice before you cancel them. Yes, it can be great to simplify your life, but that old credit card may be lengthening your credit history and, therefore, improving your credit score.
I have one credit card that I signed up for the day I turned 18. The credit card stinks and pretty much offers no benefits. However, it’s the card I’ve had the longest. To keep it active, I just buy one thing a year (such as gum)!
Side note: There are many reasons for why you may want to cancel your credit cards, though. If you are horrible with credit cards and can’t seem to have them without having credit card debt, then it may be your best idea to cancel them.
3. You pay your bills late.
According to FICO, 35% of your credit score is from your payment history. One or two late payments most likely won’t prevent you from having a good credit score, however, continually missing payments most likely will.
No matter what the bill is that you are paying, you should always pay it on time. Paying a bill late may lead to interest charges, late fees, and a drop in your credit score.
Yes, companies can report late payments to credit agencies. If you do happen to accidentally pay a bill late, do not panic, though. If you are quick enough you may be able to ask for some leniency from the company and ask them not to report it.
I once underpaid my monthly mortgage payment by $10. I must have clicked the wrong number because I’m still not even sure how that happened. Luckily I caught it quickly enough and my mortgage company realized that it must have been a mistake. They waived any late fees and also did not report it to anyone.
Related article: How To Live On One Income
4. You never check your credit report.
When was the last time you checked your credit report?
Sadly, many don’t ever check theirs!
You want to check your credit report at least once a year because there may be errors on it and this may be preventing you from having a good credit score. Errors can then lead to your score dropping and that’s a big reason to check!
You can receive your credit report for free each year so there is no reason for why you shouldn’t do this. You can get one free credit report from each of the credit bureaus once each year, so you may even want to time that out so that you can receive one every four months and stay as up-to-date on your credit report as you can.
How have you damaged your credit score in the past? Do you have a good credit score? Why or why not?