What Actually Hurts My Credit Score?
It can’t be overemphasized how important it is to work on having a good credit score since your credit score impacts everything from your ability to borrow money at the best rates to car insurance premiums, to the terms of a new cell phone plan. Your credit score sometimes affects decisions by a landlord on whether to rent you an apartment or by an employer on whether or not to hire you. If you’re keeping an eye on your credit score, you may wonder what makes it go up or down. A question we hear frequently is “What actually hurts my credit score?”
Payment history is one of the most important factors in a credit score because potential lenders want to know that you’ll repay borrowed money as agreed. If a payment is 30 days or more late, it shows up on your credit report as a negative item. A single late payment can hurt your credit score and remains on your credit report for seven years.
The credit limit on a credit card is the maximum amount the credit card company is willing to loan you, but it’s not a good idea to borrow all of it. Your credit utilization ratio is the percent of available funds you’re using. If this number is too high, it’s an indication that you’re relying too much on borrowed money. Having a credit utilization ratio that’s higher than 30 percent of your available credit can hurt your credit score.
Whenever you apply for a new credit card or loan, the lender pulls a copy of your credit report. This action shows on your credit report as a hard inquiry. Too many hard inquiries in a short amount of time can be considered an indication of a risky borrower and can negatively impact your credit score.
Length of Credit History
The calculation of your credit score considers the length of your credit history, which looks at the age of your oldest account and the average age of your accounts. If you close a credit card that has a zero balance, it could hurt your credit score by shortening the average age of your accounts. Closing an account in good standing also reduces the amount of available credit you have, which negatively affects your credit utilization ratio.
If you only have one type of credit, such as just credit cards, it can have a small impact on your credit score. Those with the best credit scores have a mix of different types of accounts such as a mortgage, car loans, student loans, and credit cards. This variety shows that you’re able to manage a wide range of credit products.
Credit Report Errors
Errors on credit reports are surprisingly common, and inaccurate information on your credit report can hurt your credit score. Make it a point to review your credit reports periodically and dispute any inaccurate information you find. Dovly is an AI credit engine that can help you dispute any errors you find on your credit report. Try it risk-free with our free membership tier. Get in touch with Dovly today.