When it comes to safeguarding your FICO score, paying your bills on time and avoiding overextension are key. However, some behaviors that seem harmless—or even helpful—could unexpectedly lower your score. Understanding these pitfalls will help you better protect your credit and financial health.
- Closing Old Credit Cards: You may have old credit cards sitting unused in your drawer. While it seems logical to close accounts you no longer need, doing so could hurt your credit. The length of your credit history is a factor in determining your score, so closing an old card can shorten this history and lower your score.
- Paying Off All Debt: While it’s tempting to become completely debt-free, lenders prefer to see that you can manage debt responsibly. Paying off all debt can reduce your credit activity, which might lower your score. Instead, consider keeping a small, manageable balance and making regular payments.
- Co-Signing Loans: Co-signing a loan may feel like a generous way to help someone, but it comes with risks. If the borrower misses even one payment, the missed payment will appear on your credit report, potentially causing significant damage to your score.
- Applying for Credit: When planning a major purchase like a car or home, it might seem responsible to apply for credit from multiple lenders to compare rates. However, too many credit inquiries within a short period can negatively affect your score.
- Ignoring Small Bills: Even small bills, like cable or pool service, should be taken seriously. If unpaid, they could end up in collections, and a collection record can damage your credit score for up to 10 years.
Taking your credit seriously is only the first step. Understanding these unintended ways you can harm your score ensures you can avoid costly mistakes and maintain strong financial health.
