10 Innocent Ways to Damage Your Credit Score
You already know that late payments or a bankruptcy filing can damage your credit score. But did you realize that seemingly minor financial decisions can also cause your score to plummet? Keep your credit report pristine by avoiding these potentially destructive moves whenever possible.
1. Opening a Department Store Card
Opening a store credit card may earn you an instant discount, but it usually initiates a hard inquiry on your credit report, which can cause your score to dip.
2. Closing a Credit Card Account
It might feel good to close a paid-off card, but doing so can shorten your credit history—a key factor in your credit score. Instead, leave the account open to maintain credit length and utilization.
- Length of credit history counts for 15% of your score
- Closing older accounts can lower your score
- Keeping cards open improves utilization rates
3. Keeping a Zero Balance
Leaving a small balance on your card can actually help your credit score by contributing to your credit utilization ratio. Cards with no balance may not be factored in the same way.
4. Disputing a Credit Card Transaction
While it’s wise to challenge unauthorized charges, be cautious when applying for credit soon after. Disputes can temporarily remove accounts from credit scoring models, affecting utilization.
5. Purchasing a Cell Phone Plan
Many cellular providers run a hard credit check, which can ding your credit by a few points. Avoid multiple inquiries by limiting how many providers check your report.
6. Buying Auto Insurance
Insurance carriers often check your credit. Though a good score may yield discounts, weigh the financial benefit against the potential drop in score from a hard inquiry.
7. Negotiating a Lower APR
Negotiating for a lower APR is smart, but ensure your creditor doesn’t reduce your credit limit. That would negatively impact your credit utilization ratio.
8. Taking Out a Student Loan
Student loans can appear as multiple accounts on your credit report if disbursed per semester. Consider consolidating after graduation to simplify and improve your credit standing.
9. Keeping a High Balance
Your credit score suffers when you use a large portion of your available credit. Aim to keep your usage below 35% of your total limit.
10. Buying a Motorcycle
Motorcycle loans are often considered revolving credit, which can resemble credit card debt and negatively affect your score. Consider this before making a purchase.
Conclusion
Some of these moves may be unavoidable, but understanding their impact allows you to make informed decisions. Avoiding or properly timing these actions can help maintain a healthy credit score.
Original article source: 10 Innocent Ways to Damage Your Credit Score – SavingsAccounts.com
