<\/a>9 Financial Behaviors Typically Lead To A Low Credit Score<\/h2>\n\n\n\n<\/a>Understanding Credit Score Basics<\/h3>\n\n\n\n\t\t\t\n\t\t\t![\"Financial](\"https:\/\/www.moneysmartguides.com\/wp-content\/uploads\/2022\/01\/Financial-Behaviors-Typically-Lead-To-A-Low-Credit-Score.jpg\")
<\/figure>\n\t\t\t\n\t\t\n\n\nIn order to understand how you can negatively impact your credit score, we need to know how your credit score is calculated.<\/p>\n\n\n\n
There are three major US credit bureaus that track your credit history, Equifax, Experian, and TransUnion.<\/p>\n\n\n\n
Your credit history is what Fair Isaac uses to calculate your FICO score, and there are 5 major factors that influence your score.<\/p>\n\n\n\n
- Payment history (35%)<\/strong><\/li>
- Amounts owed (30%)<\/strong><\/li>
- Length of credit history (15%)<\/strong><\/li>
- New credit and recently opened accounts (10%)<\/strong><\/li>
- Credit mix (10%)<\/strong><\/li><\/ul>\n\n\n\n
Your behaviors and decisions with your finances influence these factors and if you make poor decisions, you will hurt your credit score.<\/p>\n\n\n\n
But if you make smart financial decisions, you will be rewarded with a higher score.<\/p>\n\n\n\n
- Read now:<\/strong> Here are the steps to take for a higher credit score<\/a><\/li><\/ul>\n\n\n\n
Here is a breakdown of the behaviors that harm your score.<\/p>\n\n\n\n
<\/a>#1. Making Late Payments<\/h3>\n\n\n\nMissing a monthly payment is one of the biggest culprits of a low credit score.<\/p>\n\n\n\n
As mentioned earlier, 35% of your credit score is based on your payment history, so making late payments can have a big negative impact on your score.<\/p>\n\n\n\n
Even a single missing payment can bring your credit score down.<\/strong><\/p>\n\n\n\nBut of course, the damage depends on how late you make payments.<\/p>\n\n\n\n
For example, a 90 day late payment can result in a staggering 180-point drop<\/a>, depending on your credit history.<\/p>\n\n\n\nHowever, a single 30 day late payment usually has a less severe consequence, especially if you have an excellent credit history.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\nTo avoid making this costly mistake, you need to do everything in your power to pay on time.<\/p>\n\n\n\n
The best way to do this is to set reminders or setting up automatic bill pay.<\/strong><\/p>\n\n\n\n- Read now: <\/strong>Here are the pros and cons of auto bill pay<\/a><\/strong><\/li><\/ul>\n\n\n\n
You could even make it a habit to pay your bill when your statement comes in the mail.<\/p>\n\n\n\n
Even if you don\u2019t have the money to pay your balance in full, you need to at least pay the minimum to avoid late payments.<\/p>\n\n\n\n
And if you are late on a payment, call your creditor immediately and plead your case.<\/p>\n\n\n\n
If you are a customer with a solid history with the company and it\u2019s not too long after your payment due date, they sometimes are willing to not report the late payment.<\/p>\n\n\n\n
<\/a>#2. Making Minimum Payments<\/h3>\n\n\n\nAnother important factor that can hurt your credit score is by only making minimum payments.<\/p>\n\n\n\n
To be clear, as I mentioned above, if you have to make the minimum payment just to avoid being late, then do it.<\/p>\n\n\n\n
I realize life happens and every so often we end up spending more than we can afford to pay back.<\/p>\n\n\n\n
The key is to not let your spending remain out of control so you can only make minimum payments going forward.<\/strong><\/p>\n\n\n\nWhen this happens, you build higher and higher credit card debt each month.<\/p>\n\n\n\n
Not only does this make it harder to become debt free, but it hurts your credit score.<\/p>\n\n\n\n
- Read now:<\/strong> Learn Dave Ramsey Baby Steps<\/a><\/li><\/ul>\n\n\n\n
This is because your debt to credit ratio will be high.<\/p>\n\n\n\n
For example, let\u2019s say you have 2 credit cards with a $2,000 credit limit on each one.<\/p>\n\n\n\n
If you make it a habit to overspend, you might eventually see you have $2,500 in credit card debt.<\/p>\n\n\n\n
Having a $2,500 balance on $4,000 worth of credit puts your debt to credit ratio at 63%, which is higher than creditors like to see.<\/p>\n\n\n\n
Ideally, you want to stick to 30% or less for your debt to credit ratio.<\/strong><\/p>\n\n\n\nWhen you go above this, you negatively harm your credit score.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\nTo avoid this, you need to pay attention to your credit balances.<\/p>\n\n\n\n
If you notice that you cannot make payments in full or that your balances are getting higher and higher, you may need to go on a spending freeze.<\/strong><\/p>\n\n\n\nTake a few months off from spending so much.<\/p>\n\n\n\n
If you are spending money on necessities and are unable to cut back, then you need to take a more detailed look at your financial life and make some changes.<\/p>\n\n\n\n
- Read now:<\/strong> Learn how to get back on your feet financially<\/a><\/li>
- Read how:<\/strong> Click here to learn how to stop using credit cards<\/a><\/li><\/ul>\n\n\n\n
<\/span>#3. Maxing Out Credit Lines<\/span><\/h3>\n\n\n\n\t\t\t\n\t\t\t![\"max](\"https:\/\/www.moneysmartguides.com\/wp-content\/uploads\/2021\/10\/max-out-credit-cards.jpg\")
<\/figure>\n\t\t\t\n\t\t\n\n\nIf you consistently max out your credit lines month after month, your credit score will drop.<\/p>\n\n\n\n
A high credit utilization rate is a red flag to creditors that you\u2019re relying on credit as your lifeline and might be experiencing financial trouble.<\/strong><\/p>\n\n\n\nThat said, if you max out a credit card but manage to pay it in full before your next bill due date, your credit score won\u2019t be affected.<\/p>\n\n\n\n
- Read now:<\/strong> What happens when you max out your credit card<\/a><\/li><\/ul>\n\n\n\n
This is because credit card issuers typically only report the information to the major credit bureaus once a month.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\nAs mentioned before, you need to make sure you keep your credit card balances at a level that allows you to pay them off quickly.<\/strong><\/p>\n\n\n\nUsually maxing out credit cards means you are relying on them too much and you need to review your financial situation and make some changes.<\/p>\n\n\n\n
<\/a>#4. Trying To Open Multiple New Credit Accounts<\/h3>\n\n\n\nTrying to open multiple new accounts in a short time window can also negatively harm your credit score.<\/p>\n\n\n\n
When you complete a credit application, a lender will likely check your credit and see if you qualify.<\/p>\n\n\n\n
This is considered a hard inquiry, which remains on your credit report for two years.<\/p>\n\n\n\n
- Read now:<\/strong> Understand these credit card terms for better scores<\/a><\/li><\/ul>\n\n\n\n
Recent hard credit inquiries can lower your credit score by a few points.<\/p>\n\n\n\n
While this doesn\u2019t sound too bad, you should consider this fact before trying to apply for a handful of credit cards at once.<\/p>\n\n\n\n
That said, being denied a credit application won\u2019t affect your credit score.<\/p>\n\n\n\n
As mentioned earlier, it\u2019s the applications themselves that negatively impact your credit health.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\nBe patient when it comes to credit accounts and only open them as needed.<\/strong><\/p>\n\n\n\nYou likely don\u2019t need to open 5 credit cards at once.<\/p>\n\n\n\n
- Read now: <\/strong>Here are 15 common credit card mistakes to avoid<\/a><\/li><\/ul>\n\n\n\n
Pick the one that best meets your needs and open that one.<\/p>\n\n\n\n
<\/a>#5. Not Using Different Types Of Credit<\/h3>\n\n\n\nTen percent of your credit score relies on your credit mix.<\/p>\n\n\n\n
This means that depending on just one type of credit line, such as credit cards only, can negatively affect your score.<\/strong><\/p>\n\n\n\nHandling different types of debt signals that you\u2019re an experienced borrower and thus, improves your credit score.<\/p>\n\n\n\n
It\u2019s recommended to have a good mix that might include credit cards, personal loans, auto loans, and so on.<\/p>\n\n\n\n
However, don\u2019t open multiple credit lines at once without paying the bills on time so this strategy doesn\u2019t backfire.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\nThe same logic from above applies here.<\/p>\n\n\n\n
Don\u2019t just take out a car loan, a student loan, and open a credit card in hopes of improving your credit score.<\/strong><\/p>\n\n\n\nOpen credit accounts as you need them.<\/p>\n\n\n\n
Be patient with your credit score.<\/p>\n\n\n\n
As long as you are smart about it, it will rise over time.<\/p>\n\n\n\n
When I was in college, all I had was one credit card and a student loan.<\/p>\n\n\n\n
I didn\u2019t take out an auto loan until I was close to 30 and my credit is fine.<\/p>\n\n\n\n
Remember, the biggest influence is paying on time.<\/p>\n\n\n\n
If you get this right, the rest will fall into place.<\/p>\n\n\n\n
<\/a>#6. Closing Credit Accounts<\/h3>\n\n\n\n\t\t\t\n\t\t\t![\"how](\"https:\/\/www.moneysmartguides.com\/wp-content\/uploads\/2021\/10\/how-to-stop-using-credit-cards.jpg\")
<\/figure>\n\t\t\t\n\t\t\n\n\nClosing a credit account can harm your score in several different ways.<\/p>\n\n\n\n
First, you lose a portion of the credit limit calculated in your credit utilization ratio, which causes your debt-to-credit ratio to spike, which can bring your credit score down by a few points.<\/p>\n\n\n\n
For example, let\u2019s say you have two credit cards, each with $1,000 available credit limit.<\/p>\n\n\n\n
If you have a $500 balance on one card, you are utilizing 25% of your credit limit, $500 of $2,000.<\/p>\n\n\n\n
But if you close the account without a balance, you are now utilizing 50% of your credit limit, $500 of $1,000.<\/p>\n\n\n\n
Closing an account can also make you lose a part of your credit mix.<\/strong><\/p>\n\n\n\nFewer accounts in the credit mix translate to a lower credit score.<\/p>\n\n\n\n
Finally, if the account you\u2019re closing is old, it can impact the length of your credit history.<\/p>\n\n\n\n
Your credit history accounts for 15% of your credit score and provides proof of your ability to repay debt obligations.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\nLeave old credit card accounts open, just stop using them.<\/strong><\/p>\n\n\n\nEventually, you will receive a letter from the credit card company telling you they will close your account unless you use the card.<\/p>\n\n\n\n
When this happens, go buy groceries that week and put the purchase on that credit card.<\/p>\n\n\n\n
Pay it off in full and then stop using it again until you get another letter in the mail.<\/p>\n\n\n\n
<\/a>#7. Paying Off Your Loan<\/h3>\n\n\n\nThis may seem counterintuitive, but yes, paying off certain types of loans can influence your score negatively.<\/p>\n\n\n\n
There are two types of loans:<\/p>\n\n\n\n
- Revolving loans, such as credit cards<\/strong><\/li>
- Installments loans, such as a mortgage or student loans<\/strong><\/li><\/ul>\n\n\n\n
When you pay off revolving loans, your credit account stays open.<\/p>\n\n\n\n
That\u2019s why paying off such loans, such as credit card payments, contributes to a higher credit score.<\/p>\n\n\n\n
However, paying off an installment loan and fulfilling your obligation means your account is closed.<\/p>\n\n\n\n
Thus, you lose one part of your credit mix, and you\u2019ll see a slight dip in your credit score. <\/p>\n\n\n\n
However, this shouldn\u2019t stop you from paying off your loans.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\nDon\u2019t overthink this one.<\/p>\n\n\n\n
You aren\u2019t going to get ahead financially by being saddled with debt.<\/p>\n\n\n\n
- Read now:<\/strong> Learn how to quickly pay off your student loans<\/a><\/li><\/ul>\n\n\n\n
And keeping debt just to prop up your credit score isn\u2019t a wise move.<\/p>\n\n\n\n
This is because the increase you get from carrying a balance is minimal.<\/strong><\/p>\n\n\n\nFurthermore, the dip in your score when you do pay off an installment loan is minimal and short lived.<\/p>\n\n\n\n
Work hard to get out of debt, and be open to the fact that your credit score will fluctuate a little month to month.<\/p>\n\n\n\n
<\/span>#8. Ignoring Collections Calls<\/span><\/h3>\n\n\n\nIf your debt gets to the point where you stop paying it and it goes to collections, you will start getting collection calls.<\/p>\n\n\n\n
- Read now:<\/strong> What happens if you quit paying your credit cards<\/a><\/li><\/ul>\n\n\n\n
These companies are trying to get the money you owe back.<\/p>\n\n\n\n
Most people find these calls annoying and in some cases, they are harassing.<\/p>\n\n\n\n
But the biggest mistake you can make is ignoring them.<\/strong><\/p>\n\n\n\nThis is because collections are reported on your credit report.<\/p>\n\n\n\n
And if you avoid paying back the money you owe, your credit score will drop even more.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\nAs annoying as they are, you need to try to work with the collection agency.<\/strong><\/p>\n\n\n\nRemember they are trying to get the money back you owe them.<\/p>\n\n\n\n
Talk with them and try to work out a compromise where you can pay back a portion of the money you owe and they write off the rest.<\/p>\n\n\n\n
If you can\u2019t come to an agreement, you might want to reach out to a professional for some help.<\/p>\n\n\n\n
The National Foundation For Credit Counseling<\/a> is great first step.<\/p>\n\n\n\nThe sooner you are able to pay back the money owed and stop the calls, the less stressful your life will be and the faster you can get back to rebuilding your credit.<\/p>\n\n\n\n
<\/span>#9. Not Reviewing Your Credit Report<\/span><\/h3>\n\n\n\n\t\t\t\n\t\t\t![\"credit](\"https:\/\/www.moneysmartguides.com\/wp-content\/uploads\/2022\/01\/credit-report.jpg\")
<\/figure>\n\t\t\t\n\t\t\n\n\nThis is an often overlooked behavior that can destroy your credit.<\/p>\n\n\n\n
With the prevalence is identity theft, chances are good that at some point you will become a victim.<\/p>\n\n\n\n
- Read now:<\/strong> Find out how to prevent identity theft<\/a><\/li>
- Read now:<\/strong> Learn the pros and cons of freezing your credit<\/a><\/li><\/ul>\n\n\n\n
But it\u2019s not just identity theft that has an influence.<\/p>\n\n\n\n
Credit bureaus can make mistakes when entering information your report that can hurt your score.<\/p>\n\n\n\n
By checking your credit report every year, you can spot any possible incorrect information or cases of fraud.<\/p>\n\n\n\n
For example, on my credit report, it showed one address I lived at 3 different ways, 2 of which were wrong.<\/p>\n\n\n\n
I can\u2019t say for certain that this error had an impact on my credit score, but I didn\u2019t want to risk it so I corrected it.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\nSet an annual reminder to review your credit report.<\/p>\n\n\n\n
You can get a free copy of your credit report at AnnualCreditReport.com<\/a> from all 3 credit bureaus.<\/p>\n\n\n\n- Read now:<\/strong> Use this trick to get your credit report 3 times a year<\/a><\/li><\/ul>\n\n\n\n
Take the time now to spot anything unusual.<\/p>\n\n\n\n
I know you might not think this is a big deal, but the longer a mistake or fraud goes on, the bigger the impact it has on your credit score.<\/p>\n\n\n\n
Not only that, but the harder it is to fix, which leads to more work and stress on you.<\/p>\n\n\n\n
Understand that the link above only gives you free credit reports, not your credit score.<\/p>\n\n\n\n
The major credit bureaus charge for your credit score.<\/p>\n\n\n\n
But you can get it for free by using Credit Sesame.<\/p>\n\n\n\n
- Read now:<\/strong> Here is my review of Credit Sesame<\/a><\/li><\/ul>\n\n\n\n
Not only that, they will help you understand your credit report, so you can make the best decisions to increase your score the fastest.<\/p>\n\n\n\n
<\/a><\/a>Final Thoughts<\/h3>\n\n\n\nThere are the 9 biggest financial behaviors that typically lead to a low credit score.<\/strong><\/p>\n\n\n\nHands down, making late payments is one of the biggest culprits of a bad credit score.<\/p>\n\n\n\n
That said, you must also be aware of your other financial decisions and how they can influence your credit score in the long run.<\/p>\n\n\n\n
Always be aware of your financial decisions to build a good credit score in the long run.<\/p>\n\n\n\n
And know that if you do make a mistake, your credit score will drop relatively fast.<\/p>\n\n\n\n
But don\u2019t be alarmed.<\/p>\n\n\n\n
As long as you implement good financial practices going forward and are patient, your credit score should bounce back within a few months.<\/p>\n\n\n\n
- Read now:<\/strong> Learn the best ways to make money with credit cards<\/a><\/li>
- Read now:<\/strong> Find out how to get out of debt for good<\/a><\/li>
- Read now:<\/strong> Here are the best tricks to stay debt free<\/a><\/li><\/ul>","protected":false},"excerpt":{"rendered":"
Having a high credit score not only opens the door to financing larger purchases, but it also helps you save money by qualifying for lower interest rates. Because of this, building a good credit score is essential since a low credit score can negatively influence your financial situation. That\u2019s why you must recognize what kind of financial behaviors can impact your credit score. A missed payment and having a high balance are common financial behaviors 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Dulin","author_link":"https:\/\/www.moneysmartguides.com\/author\/jon-dulin"},"uagb_comment_info":0,"uagb_excerpt":"Having a high credit score not only opens the door to financing larger purchases, but it also helps you save money by qualifying for lower interest rates. Because of this, building a good credit score is essential since a low credit score can negatively influence your financial situation. That\u2019s why you must recognize what kind…","_links":{"self":[{"href":"https:\/\/www.moneysmartguides.com\/wp-json\/wp\/v2\/posts\/24265"}],"collection":[{"href":"https:\/\/www.moneysmartguides.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.moneysmartguides.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.moneysmartguides.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.moneysmartguides.com\/wp-json\/wp\/v2\/comments?post=24265"}],"version-history":[{"count":0,"href":"https:\/\/www.moneysmartguides.com\/wp-json\/wp\/v2\/posts\/24265\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.moneysmartguides.com\/wp-json\/wp\/v2\/media\/24266"}],"wp:attachment":[{"href":"https:\/\/www.moneysmartguides.com\/wp-json\/wp\/v2\/media?parent=24265"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.moneysmartguides.com\/wp-json\/wp\/v2\/categories?post=24265"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.moneysmartguides.com\/wp-json\/wp\/v2\/tags?post=24265"},{"taxonomy":"disclaimer","embeddable":true,"href":"https:\/\/www.moneysmartguides.com\/wp-json\/wp\/v2\/disclaimer?post=24265"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
<\/figure>\n\t\t\t\n\t\t\n\n\nIn order to understand how you can negatively impact your credit score, we need to know how your credit score is calculated.<\/p>\n\n\n\n
There are three major US credit bureaus that track your credit history, Equifax, Experian, and TransUnion.<\/p>\n\n\n\n
Your credit history is what Fair Isaac uses to calculate your FICO score, and there are 5 major factors that influence your score.<\/p>\n\n\n\n
- Payment history (35%)<\/strong><\/li>
- Amounts owed (30%)<\/strong><\/li>
- Length of credit history (15%)<\/strong><\/li>
- New credit and recently opened accounts (10%)<\/strong><\/li>
- Credit mix (10%)<\/strong><\/li><\/ul>\n\n\n\n
Your behaviors and decisions with your finances influence these factors and if you make poor decisions, you will hurt your credit score.<\/p>\n\n\n\n
But if you make smart financial decisions, you will be rewarded with a higher score.<\/p>\n\n\n\n
- Read now:<\/strong> Here are the steps to take for a higher credit score<\/a><\/li><\/ul>\n\n\n\n
Here is a breakdown of the behaviors that harm your score.<\/p>\n\n\n\n
<\/a>#1. Making Late Payments<\/h3>\n\n\n\n
Missing a monthly payment is one of the biggest culprits of a low credit score.<\/p>\n\n\n\n
As mentioned earlier, 35% of your credit score is based on your payment history, so making late payments can have a big negative impact on your score.<\/p>\n\n\n\n
Even a single missing payment can bring your credit score down.<\/strong><\/p>\n\n\n\n
But of course, the damage depends on how late you make payments.<\/p>\n\n\n\n
For example, a 90 day late payment can result in a staggering 180-point drop<\/a>, depending on your credit history.<\/p>\n\n\n\n
However, a single 30 day late payment usually has a less severe consequence, especially if you have an excellent credit history.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\n
To avoid making this costly mistake, you need to do everything in your power to pay on time.<\/p>\n\n\n\n
The best way to do this is to set reminders or setting up automatic bill pay.<\/strong><\/p>\n\n\n\n
- Read now: <\/strong>Here are the pros and cons of auto bill pay<\/a><\/strong><\/li><\/ul>\n\n\n\n
You could even make it a habit to pay your bill when your statement comes in the mail.<\/p>\n\n\n\n
Even if you don\u2019t have the money to pay your balance in full, you need to at least pay the minimum to avoid late payments.<\/p>\n\n\n\n
And if you are late on a payment, call your creditor immediately and plead your case.<\/p>\n\n\n\n
If you are a customer with a solid history with the company and it\u2019s not too long after your payment due date, they sometimes are willing to not report the late payment.<\/p>\n\n\n\n
<\/a>#2. Making Minimum Payments<\/h3>\n\n\n\n
Another important factor that can hurt your credit score is by only making minimum payments.<\/p>\n\n\n\n
To be clear, as I mentioned above, if you have to make the minimum payment just to avoid being late, then do it.<\/p>\n\n\n\n
I realize life happens and every so often we end up spending more than we can afford to pay back.<\/p>\n\n\n\n
The key is to not let your spending remain out of control so you can only make minimum payments going forward.<\/strong><\/p>\n\n\n\n
When this happens, you build higher and higher credit card debt each month.<\/p>\n\n\n\n
Not only does this make it harder to become debt free, but it hurts your credit score.<\/p>\n\n\n\n
- Read now:<\/strong> Learn Dave Ramsey Baby Steps<\/a><\/li><\/ul>\n\n\n\n
This is because your debt to credit ratio will be high.<\/p>\n\n\n\n
For example, let\u2019s say you have 2 credit cards with a $2,000 credit limit on each one.<\/p>\n\n\n\n
If you make it a habit to overspend, you might eventually see you have $2,500 in credit card debt.<\/p>\n\n\n\n
Having a $2,500 balance on $4,000 worth of credit puts your debt to credit ratio at 63%, which is higher than creditors like to see.<\/p>\n\n\n\n
Ideally, you want to stick to 30% or less for your debt to credit ratio.<\/strong><\/p>\n\n\n\n
When you go above this, you negatively harm your credit score.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\n
To avoid this, you need to pay attention to your credit balances.<\/p>\n\n\n\n
If you notice that you cannot make payments in full or that your balances are getting higher and higher, you may need to go on a spending freeze.<\/strong><\/p>\n\n\n\n
Take a few months off from spending so much.<\/p>\n\n\n\n
If you are spending money on necessities and are unable to cut back, then you need to take a more detailed look at your financial life and make some changes.<\/p>\n\n\n\n
- Read now:<\/strong> Learn how to get back on your feet financially<\/a><\/li>
- Read how:<\/strong> Click here to learn how to stop using credit cards<\/a><\/li><\/ul>\n\n\n\n
<\/span>#3. Maxing Out Credit Lines<\/span><\/h3>\n\n\n\n\t\t\t\n\t\t\t
<\/figure>\n\t\t\t\n\t\t\n\n\nIf you consistently max out your credit lines month after month, your credit score will drop.<\/p>\n\n\n\n
A high credit utilization rate is a red flag to creditors that you\u2019re relying on credit as your lifeline and might be experiencing financial trouble.<\/strong><\/p>\n\n\n\n
That said, if you max out a credit card but manage to pay it in full before your next bill due date, your credit score won\u2019t be affected.<\/p>\n\n\n\n
- Read now:<\/strong> What happens when you max out your credit card<\/a><\/li><\/ul>\n\n\n\n
This is because credit card issuers typically only report the information to the major credit bureaus once a month.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\n
As mentioned before, you need to make sure you keep your credit card balances at a level that allows you to pay them off quickly.<\/strong><\/p>\n\n\n\n
Usually maxing out credit cards means you are relying on them too much and you need to review your financial situation and make some changes.<\/p>\n\n\n\n
<\/a>#4. Trying To Open Multiple New Credit Accounts<\/h3>\n\n\n\n
Trying to open multiple new accounts in a short time window can also negatively harm your credit score.<\/p>\n\n\n\n
When you complete a credit application, a lender will likely check your credit and see if you qualify.<\/p>\n\n\n\n
This is considered a hard inquiry, which remains on your credit report for two years.<\/p>\n\n\n\n
- Read now:<\/strong> Understand these credit card terms for better scores<\/a><\/li><\/ul>\n\n\n\n
Recent hard credit inquiries can lower your credit score by a few points.<\/p>\n\n\n\n
While this doesn\u2019t sound too bad, you should consider this fact before trying to apply for a handful of credit cards at once.<\/p>\n\n\n\n
That said, being denied a credit application won\u2019t affect your credit score.<\/p>\n\n\n\n
As mentioned earlier, it\u2019s the applications themselves that negatively impact your credit health.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\n
Be patient when it comes to credit accounts and only open them as needed.<\/strong><\/p>\n\n\n\n
You likely don\u2019t need to open 5 credit cards at once.<\/p>\n\n\n\n
- Read now: <\/strong>Here are 15 common credit card mistakes to avoid<\/a><\/li><\/ul>\n\n\n\n
Pick the one that best meets your needs and open that one.<\/p>\n\n\n\n
<\/a>#5. Not Using Different Types Of Credit<\/h3>\n\n\n\n
Ten percent of your credit score relies on your credit mix.<\/p>\n\n\n\n
This means that depending on just one type of credit line, such as credit cards only, can negatively affect your score.<\/strong><\/p>\n\n\n\n
Handling different types of debt signals that you\u2019re an experienced borrower and thus, improves your credit score.<\/p>\n\n\n\n
It\u2019s recommended to have a good mix that might include credit cards, personal loans, auto loans, and so on.<\/p>\n\n\n\n
However, don\u2019t open multiple credit lines at once without paying the bills on time so this strategy doesn\u2019t backfire.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\n
The same logic from above applies here.<\/p>\n\n\n\n
Don\u2019t just take out a car loan, a student loan, and open a credit card in hopes of improving your credit score.<\/strong><\/p>\n\n\n\n
Open credit accounts as you need them.<\/p>\n\n\n\n
Be patient with your credit score.<\/p>\n\n\n\n
As long as you are smart about it, it will rise over time.<\/p>\n\n\n\n
When I was in college, all I had was one credit card and a student loan.<\/p>\n\n\n\n
I didn\u2019t take out an auto loan until I was close to 30 and my credit is fine.<\/p>\n\n\n\n
Remember, the biggest influence is paying on time.<\/p>\n\n\n\n
If you get this right, the rest will fall into place.<\/p>\n\n\n\n
<\/a>#6. Closing Credit Accounts<\/h3>\n\n\n\n\t\t\t\n\t\t\t
<\/figure>\n\t\t\t\n\t\t\n\n\nClosing a credit account can harm your score in several different ways.<\/p>\n\n\n\n
First, you lose a portion of the credit limit calculated in your credit utilization ratio, which causes your debt-to-credit ratio to spike, which can bring your credit score down by a few points.<\/p>\n\n\n\n
For example, let\u2019s say you have two credit cards, each with $1,000 available credit limit.<\/p>\n\n\n\n
If you have a $500 balance on one card, you are utilizing 25% of your credit limit, $500 of $2,000.<\/p>\n\n\n\n
But if you close the account without a balance, you are now utilizing 50% of your credit limit, $500 of $1,000.<\/p>\n\n\n\n
Closing an account can also make you lose a part of your credit mix.<\/strong><\/p>\n\n\n\n
Fewer accounts in the credit mix translate to a lower credit score.<\/p>\n\n\n\n
Finally, if the account you\u2019re closing is old, it can impact the length of your credit history.<\/p>\n\n\n\n
Your credit history accounts for 15% of your credit score and provides proof of your ability to repay debt obligations.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\n
Leave old credit card accounts open, just stop using them.<\/strong><\/p>\n\n\n\n
Eventually, you will receive a letter from the credit card company telling you they will close your account unless you use the card.<\/p>\n\n\n\n
When this happens, go buy groceries that week and put the purchase on that credit card.<\/p>\n\n\n\n
Pay it off in full and then stop using it again until you get another letter in the mail.<\/p>\n\n\n\n
<\/a>#7. Paying Off Your Loan<\/h3>\n\n\n\n
This may seem counterintuitive, but yes, paying off certain types of loans can influence your score negatively.<\/p>\n\n\n\n
There are two types of loans:<\/p>\n\n\n\n
- Revolving loans, such as credit cards<\/strong><\/li>
- Installments loans, such as a mortgage or student loans<\/strong><\/li><\/ul>\n\n\n\n
When you pay off revolving loans, your credit account stays open.<\/p>\n\n\n\n
That\u2019s why paying off such loans, such as credit card payments, contributes to a higher credit score.<\/p>\n\n\n\n
However, paying off an installment loan and fulfilling your obligation means your account is closed.<\/p>\n\n\n\n
Thus, you lose one part of your credit mix, and you\u2019ll see a slight dip in your credit score. <\/p>\n\n\n\n
However, this shouldn\u2019t stop you from paying off your loans.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\n
Don\u2019t overthink this one.<\/p>\n\n\n\n
You aren\u2019t going to get ahead financially by being saddled with debt.<\/p>\n\n\n\n
- Read now:<\/strong> Learn how to quickly pay off your student loans<\/a><\/li><\/ul>\n\n\n\n
And keeping debt just to prop up your credit score isn\u2019t a wise move.<\/p>\n\n\n\n
This is because the increase you get from carrying a balance is minimal.<\/strong><\/p>\n\n\n\n
Furthermore, the dip in your score when you do pay off an installment loan is minimal and short lived.<\/p>\n\n\n\n
Work hard to get out of debt, and be open to the fact that your credit score will fluctuate a little month to month.<\/p>\n\n\n\n
<\/span>#8. Ignoring Collections Calls<\/span><\/h3>\n\n\n\n
If your debt gets to the point where you stop paying it and it goes to collections, you will start getting collection calls.<\/p>\n\n\n\n
- Read now:<\/strong> What happens if you quit paying your credit cards<\/a><\/li><\/ul>\n\n\n\n
These companies are trying to get the money you owe back.<\/p>\n\n\n\n
Most people find these calls annoying and in some cases, they are harassing.<\/p>\n\n\n\n
But the biggest mistake you can make is ignoring them.<\/strong><\/p>\n\n\n\n
This is because collections are reported on your credit report.<\/p>\n\n\n\n
And if you avoid paying back the money you owe, your credit score will drop even more.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\n
As annoying as they are, you need to try to work with the collection agency.<\/strong><\/p>\n\n\n\n
Remember they are trying to get the money back you owe them.<\/p>\n\n\n\n
Talk with them and try to work out a compromise where you can pay back a portion of the money you owe and they write off the rest.<\/p>\n\n\n\n
If you can\u2019t come to an agreement, you might want to reach out to a professional for some help.<\/p>\n\n\n\n
The National Foundation For Credit Counseling<\/a> is great first step.<\/p>\n\n\n\n
The sooner you are able to pay back the money owed and stop the calls, the less stressful your life will be and the faster you can get back to rebuilding your credit.<\/p>\n\n\n\n
<\/span>#9. Not Reviewing Your Credit Report<\/span><\/h3>\n\n\n\n\t\t\t\n\t\t\t
<\/figure>\n\t\t\t\n\t\t\n\n\nThis is an often overlooked behavior that can destroy your credit.<\/p>\n\n\n\n
With the prevalence is identity theft, chances are good that at some point you will become a victim.<\/p>\n\n\n\n
- Read now:<\/strong> Find out how to prevent identity theft<\/a><\/li>
- Read now:<\/strong> Learn the pros and cons of freezing your credit<\/a><\/li><\/ul>\n\n\n\n
But it\u2019s not just identity theft that has an influence.<\/p>\n\n\n\n
Credit bureaus can make mistakes when entering information your report that can hurt your score.<\/p>\n\n\n\n
By checking your credit report every year, you can spot any possible incorrect information or cases of fraud.<\/p>\n\n\n\n
For example, on my credit report, it showed one address I lived at 3 different ways, 2 of which were wrong.<\/p>\n\n\n\n
I can\u2019t say for certain that this error had an impact on my credit score, but I didn\u2019t want to risk it so I corrected it.<\/p>\n\n\n\n
<\/span>How To Avoid This Mistake<\/span><\/h4>\n\n\n\n
Set an annual reminder to review your credit report.<\/p>\n\n\n\n
You can get a free copy of your credit report at AnnualCreditReport.com<\/a> from all 3 credit bureaus.<\/p>\n\n\n\n
- Read now:<\/strong> Use this trick to get your credit report 3 times a year<\/a><\/li><\/ul>\n\n\n\n
Take the time now to spot anything unusual.<\/p>\n\n\n\n
I know you might not think this is a big deal, but the longer a mistake or fraud goes on, the bigger the impact it has on your credit score.<\/p>\n\n\n\n
Not only that, but the harder it is to fix, which leads to more work and stress on you.<\/p>\n\n\n\n
Understand that the link above only gives you free credit reports, not your credit score.<\/p>\n\n\n\n
The major credit bureaus charge for your credit score.<\/p>\n\n\n\n
But you can get it for free by using Credit Sesame.<\/p>\n\n\n\n
- Read now:<\/strong> Here is my review of Credit Sesame<\/a><\/li><\/ul>\n\n\n\n
Not only that, they will help you understand your credit report, so you can make the best decisions to increase your score the fastest.<\/p>\n\n\n\n
<\/a><\/a>Final Thoughts<\/h3>\n\n\n\n
There are the 9 biggest financial behaviors that typically lead to a low credit score.<\/strong><\/p>\n\n\n\n
Hands down, making late payments is one of the biggest culprits of a bad credit score.<\/p>\n\n\n\n
That said, you must also be aware of your other financial decisions and how they can influence your credit score in the long run.<\/p>\n\n\n\n
Always be aware of your financial decisions to build a good credit score in the long run.<\/p>\n\n\n\n
And know that if you do make a mistake, your credit score will drop relatively fast.<\/p>\n\n\n\n
But don\u2019t be alarmed.<\/p>\n\n\n\n
As long as you implement good financial practices going forward and are patient, your credit score should bounce back within a few months.<\/p>\n\n\n\n
- Read now:<\/strong> Learn the best ways to make money with credit cards<\/a><\/li>
- Read now:<\/strong> Find out how to get out of debt for good<\/a><\/li>
- Read now:<\/strong> Here are the best tricks to stay debt free<\/a><\/li><\/ul>","protected":false},"excerpt":{"rendered":"
Having a high credit score not only opens the door to financing larger purchases, but it also helps you save money by qualifying for lower interest rates. Because of this, building a good credit score is essential since a low credit score can negatively influence your financial situation. That\u2019s why you must recognize what kind of financial behaviors can impact your credit score. A missed payment and having a high balance are common financial behaviors 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Because of this, building a good credit score is essential since a low credit score can negatively influence your financial situation. 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- Read now:<\/strong> Find out how to get out of debt for good<\/a><\/li>
- Read now:<\/strong> Learn the best ways to make money with credit cards<\/a><\/li>
- Read now:<\/strong> Here is my review of Credit Sesame<\/a><\/li><\/ul>\n\n\n\n
- Read now:<\/strong> Learn the pros and cons of freezing your credit<\/a><\/li><\/ul>\n\n\n\n
- Read now:<\/strong> Find out how to prevent identity theft<\/a><\/li>
- Read now:<\/strong> What happens if you quit paying your credit cards<\/a><\/li><\/ul>\n\n\n\n
- Installments loans, such as a mortgage or student loans<\/strong><\/li><\/ul>\n\n\n\n
- Revolving loans, such as credit cards<\/strong><\/li>
- Read now: <\/strong>Here are 15 common credit card mistakes to avoid<\/a><\/li><\/ul>\n\n\n\n
- Read now:<\/strong> Understand these credit card terms for better scores<\/a><\/li><\/ul>\n\n\n\n
- Read how:<\/strong> Click here to learn how to stop using credit cards<\/a><\/li><\/ul>\n\n\n\n
- Read now:<\/strong> Learn how to get back on your feet financially<\/a><\/li>
- Read now:<\/strong> Learn Dave Ramsey Baby Steps<\/a><\/li><\/ul>\n\n\n\n
- Read now: <\/strong>Here are the pros and cons of auto bill pay<\/a><\/strong><\/li><\/ul>\n\n\n\n
- Amounts owed (30%)<\/strong><\/li>