1. Making late payments
Making your payments on time is key to having good credit. The more late payments you have the lower your credit score will be. If the due date doesn’t work for you, contact your bank and ask to have the due date changed to a more convenient date. Every month you make a late payment, the creditor reports this to Equifax and Transunion. Once they report this to the credit bureau, any creditor that you apply for credit with can see that you made late payments.
2. Maxing out your credit cards
Once you use more than 30 – 35% of your available credit, your credit score will start to go down. For example, if you have a credit card with a $10,000 limit, you want to keep the balance owing on that card under $3500. Maxed out credit means that you are a high utilizer of credit, which is not a good thing to a bank.
3. Lots of inquiries
An inquiry is when you apply for credit. Every time you apply for a credit card, a loan, a line of credit or a mortgage, the bank reports this to the credit bureau as an inquiry, meaning that you inquired at a particular bank. To the lender, if you have many inquiries, you are considered a credit seeker. Too many inquiries will lower your score. Try not to apply for too many credit cards and loans within a year.
4. Skipping a payment
Never skip payments. Let me repeat that again. Never skip a payment. The objective should be to pay it off! If you are unable to make a payment one month, contact your lender and try to work out some sort of payment arrangement. Skipping payments will eventually cause your account to go to collections. This will hurt your credit score over the long run. Collection items remain on the credit bureau for 7 years.