You probably already know that your credit score is important because of the role it plays in credit decisions for things like mortgages, car loans, and other loans or lines of credit. Here are ten things that will negatively impact your credit:

1. Making late payments. Make sure your payments are made on time, if not early, every month. Use payment tools provided by your lenders, or use bill-pay services through your bank to make sure you never miss a payment date.
2. “Maxing out” your credit cards. It’s great to have a lot of available credit when you need it in an emergency, but if you are consistently maxing out your credit cards every month, lenders will be skittish about your ability to repay debt.
3. Having too many open accounts. While lenders and the credit bureaus look favorably on those with several different types of credit (mortgages, student loans, auto loans, credit cards, personal loans, etc..), having too many open credit card accounts can work against you.
4. Not having enough open accounts. If you have credit cards but don’t have any open loans, your score will likely be lower than a consumer with credit cards and loans, all other things being equal because installment loans are viewed more favorably than revolving debt by lenders. Likewise, if you pay cash for everything and don’t have any active credit or loan accounts, your credit will be lower than it should be because you don’t have an active history of paying lenders.
5. Applying for too many cards/loans. Don’t apply for several credit cards at the same time, as that could indicate that you are desperate for credit, making lenders less likely to offer competitive interest rates and terms.
6. Canceling all of your credit cards. Sometimes when people want to improve their credit scores, they decide to cancel their credit cards. However, doing this could result in a big drop in your credit score temporarily because the total available credit will have dropped and the percentage of credit used will rise.
7. Canceling your oldest credit card. The length of your credit history matters. If you cancel your oldest credit card, that could result in a drop in your credit score temporarily.
8. Making only minimum payments. Making minimum payments will still count as honoring your agreement with the creditor, which is positive, however, it will end up affecting your utilization rate over time. To improve your credit score, try to either pay your balance in full each month or pay more than the minimum payment.
9. Co-signing a loan. Think carefully before agreeing to co-sign a loan or credit application for a friend or family member, as their failure to make payments on that debt will negatively impact your credit.
10. Allowing payments to go to collections. If you fall behind on a debt, make every effort to work out payment arrangements with your creditors before they send the matter to a collection agency.

To learn more about improving your credit and reaching financial freedom, contact us today.