4 credit card habits that will ruin your credit score

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Don’t put your credit at risk with these bad tricks.


Key points

  • Credit cards can either help or hurt your credit, and some bad habits will have a bad effect on your credit score.
  • One habit to break is to max out your credit cards.

Credit cards affect your credit score. That’s probably no surprise, since your score is affected by how you use debt. But, while most people know that what they do with their cards impacts their credit rating, they might not know exactly how.

You don’t want to inadvertently hurt your credit score by adopting bad habits with your credit cards, so be sure to avoid these four behaviors that could cause serious damage.

1. Maximize your cards

Maxing out your credit cards is a dangerous financial habit to get into for many reasons. Of course, if you max out your cards, it’s harder to pay off your debt and your interest charges could be high. But your credit can also be affected.

Too much on your cards hurts your score because it negatively affects a crucial factor used to determine it: your credit utilization rate. This is the ratio between the credit you have used and the total credit you have. If your ratio goes over 30%, your score drops – and maxing your cards means you’re well over 30%.

If you want the best possible credit rating, you should get into the habit of never charging more than 30% of your credit limit and ideally keeping your ratio even lower than that.

2. Pay your bills late

If you make a habit of paying your bills after the due date, it will hurt your credit score a lot. Payment history is the most important criteria when setting your credit score and if you are more than 30 days past due, it will be reflected on your payment record.

Instead of falling into this bad habit, make sure you always pay your bill on time. Set yourself a reminder, or better yet, automate your payment so it’s taken directly from your bank account and can’t be late.

3. Open tons of new credit cards all the time

It may seem like opening lots of new credit cards is a harmless habit, but it’s not — it can hurt your credit, too. This is because the average credit age and inquiries are two other factors that are part of the credit score formula.

Average credit age is important because lenders want to see that you’ve been responsible for your debt for a long time. A shorter credit history means they can’t be as confident in your borrowing behavior. And opening lots of new cards shortens your credit history.

Inquiries, on the other hand, are placed each time your credit is checked after a request to take on new debt. Lenders get nervous about a lot of inquiries — which you get when you regularly open new cards — because they might signal that you’re borrowing and won’t be able to pay it all back.

This does not mean that you should never open new cards, but you should do so sparingly and space out requests for new credit.

4. Close old credit cards

Finally, if you make a habit of closing cards that you no longer use, you will hurt your credit utilization rate by eliminating some of the available credit. And you will hurt the average age of your account history and lose the positive payment history of these cards.

The good news is that all of these habits are easy to avoid if you know the damage they will cause. Just be smart about when and how you use your cards, and you can protect your credit score so a bad rating doesn’t make your life harder.

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