Too many people are afraid of their credit scores.
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?
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Jayson @ Monster Piggy Bank says
I used to pay my credit card bills late, so it resulted to bad credit scores, which at first I didn’t give a high regard. But, when the time that I had to present a good credit score for loan purposes, my request had been turned down because of my bad score. Now, I always pay my bills on time to create a good payment history.
Michelle Schroeder-Gardner says
Glad you figured it out 🙂
Mark@BareBudgetGuy says
I used to cancel ALL of my credit cards as soon as I got the bonus. I don’t do it quite as much now, but luckily, for whatever reason, it never impacted my score too significantly.
Michelle Schroeder-Gardner says
Yeah, I’ve cancelled quite a few cards this year and nothing has really happened. However, I do still have my longest standing one!
Natalie @ Financegirl says
I think 4 gets people all the time. I keep an alert in my calendar so I know it’s time to get my reports.
Michelle Schroeder-Gardner says
Good job!
Penny @ She Picks Up Pennies says
Avoiding information isn’t a way to solve a problem, so I’d say tip 4 is hugely important.
Michelle Schroeder-Gardner says
Agreed!
Kalie @ Pretend to Be Poor says
I made a credit card mistake when I moved out of my shared college house to get married, and forgot that the water bill was in my name. When my former roommates moved, they never received & paid the final bill and it went to collections. I found out by checking my credit score. Luckily it didn’t damage it too much, I paid the bill, and it’s cleared now since it’s been so long. But this is a good reason to check your score–and keep track of what’s in your name!
Michelle Schroeder-Gardner says
Oh no! Glad it didn’t do too much damage.
Kevin H @ Savvy On Credit says
Closing a credit card may affect your utilization ratio more than your length of history. Your utilization goes up (which hurts your score) because your total credit limit goes down, but your balances remain the same. The length of history remains the same for another 7 years until the closed account ages off your report.
Michelle Schroeder-Gardner says
Yes, good point!
Holly@ClubThrifty says
Our scores are over 800 now, which is pretty sweet considering we have so much open credit. Our utilization is zero though, so that helps. We also pay all of our bills on time and in full, 100% of the time~
Michelle Schroeder-Gardner says
Good job!
Stefanie @ The Broke and Beautiful Life says
I close my rewards cards when they’re about to hit me with the annual fee, but I keep my oldest credit line open so that I don’t wipe out those years of history. I also pay down all my cards before closing one so that I don’t hurt my utilization.
Michelle Schroeder-Gardner says
Good job!
Jim Wang says
A few years ago I was able to consolidate two Citi cards into one (the older one), which is a good way to keep your total credit limit the same but close out a card so there was less “clutter.”
Michelle Schroeder-Gardner says
Great idea!
Jen@OurFrugalLife says
When my husband and I started dating, he had a terrible credit score from living a little too wildly during his younger years. But he had given up trying to fix it and was just “biding his time” until the mistakes fell off his report. His mother, on the other hand, had a great credit history and hated credit cards but wanted to have one for emergencies. Well, after we got married and settled, we wanted to buy a house. And we didn’t have the luxury of time to boost his credit score. His mom had had that credit card for about 25 years at the time we were thinking of buying a house. So, we asked her to add him as an authorized user to the account and to shred the card when it came. By just adding him to the account, he reaped the benefits of lengthening his time with credit and dropping his overall utilization. In the end, his score went up enough that we were able to qualify for a loan. The lesson we learned was that there are ways to increase your score if you think creatively!
Michelle Schroeder-Gardner says
Wow nice!
Michelle Schroeder-Gardner says
Yes, that site is great!
Michelle Schroeder-Gardner says
Yes, utilization plays a big role!
Janet Fazio says
A lot of credit cards provide you with your FICO score for free these days. I always check mine to see if there is any unusual movement.
Michelle Schroeder-Gardner says
Yes, love the free score!
Michelle Schroeder-Gardner says
🙁 I’ll have to look into what the process is in Canada!
Kim says
I cancel cards fairly often because of churning, but I try to transfer the credit to another card from the same company. As long as you pay them off every month, I think that’s the most important thing.
Michelle Schroeder-Gardner says
Great idea!
Gina says
I waited until I was 22 to get a credit card. No one told me about student credit cards for when I was in college until after I graduated. So, I’m working with a much shorter history now.
Michelle Schroeder-Gardner says
22 is still a great age! I’m sure you understand credit much better at 22 than an 18 year old.