Your credit score can make a big impact on your financial life. If your credit rating is poor, you will have a more difficult time getting approved for loans and get charged higher insurance rates. Missed and late payments are not the only things that can damage your credit history. Here are five factors that can lower your credit score:
Closing Unused Credit Cards
If you do not use a credit card very often, you might think it is perfectly alright to close it. However, doing so can backfire. According to Bankrate, closing a credit card can increase your credit utilization, which looks bad on a credit report. You should use each credit card at least once a quarter for things you really need and pay off the balance the following month.
Applying for Too Many Credit Cards at Once
There is such a thing as applying for too many credit cards at once. If you do this, lenders may see you as financially irresponsible and lower your credit score. Nerd Wallet recommends applying to no more than one credit card every six months.
Having High Credit Card Balances
Unless you have an emergency, you should avoid keeping high credit card balances. If you have high credit card balances, it will increase your credit utilization. You can avoid this by paying off your credit card balances in full every month.
Not Paying the Minimum Amount
If you pay less than the minimum amount on your credit cards, your account will be considered past due. Not paying the minimum amount can also result in late charges. If you think you will have trouble paying the minimum amount this month, notify your creditor as soon as possible.
Not Checking Your Credit Report
It is wise to periodically check your credit report to make sure there are no errors. If there are inaccuracies on your credit report, you will have more difficulty getting approved for regular and signature loans. If you believe there is a mistake on your credit report, you should notify the credit bureau as soon as possible.
As you can see, there are several things that can make your credit score go down. However, if you keep up with your payments and do not borrow too much, you can maintain a healthy credit rating. If you ever have problems making your payments, contact the credit card company immediately to work out a solution.