We all want the highest credit score possible. With an unblemished credit report, we can get the best rates, the best financial products and the best of everything. Whenever we walk into a financial institution, a car dealership or a furniture store, we are VIPs and everyone pays attention to us.
Although we can be overzealous when we have access to credit, being irresponsible and reckless with lines of credit, credit cards and other types of credit are big no-nos for our credit scores. Even though a large credit score can lead to more credit than we can handle, it should be avoided at all costs.
The best way to build a credit score is to be conservative, prudent and responsible. On the other hand, if you want to destroy your credit then you do the opposite: miss bill payments, ignore your credit reports and garner as much credit as possible. This isn’t advised.
Here are six ways to ruin your credit score:
1. Running up a Large Balance Every Month
Let’s say you have a credit limit of $5,000 per month. For whatever reason, every single month you run up a large balance of $4,000. Yes, you pay off the balance each month, but you are close to maxing out your card every 30 days. The reason why you shouldn’t pull out the plastic every month is because a high credit utilization ratio can be very damaging to your credit score.
2. Paying Bills Late or Not at All
Your cable bill was due on the 14th, but you paid it on the 20th. Your phone bill was due on the 17th but you didn’t pay it at all. Your business loan was missed by two weeks. Oh, and your rent payments are late on a regular basis. This is something to reverse immediately because paying bills late or not at all will reduce your credit score very soon.
3. Bouncing Checks
You just sent the Internal Revenue Service a check for your tax return but it bounced. You also gave your landlord a check for last month’s rent, but it also bounced. Bouncing checks left, right and center are terrible for your credit score. Doing this on regularly will lead to a poor credit report.
4. Applying for New Cards or Closing Accounts
Whenever you received a pre-approved credit card application in the mail or you see a zero percent interest rate credit card from another company, you immediately apply for it. In fact, you apply for new cards all the time. Or, on the other hand, you try to limit your debt intake by closing credit accounts. Both extremes pose potential threats to your credit score. Instead, have about two credit cards and pay them off each month. It’s as simple as that!
5. You Don’t Check Your Credit Reports
When was the last time you checked your credit report? If you answered more than three years then you may be in big trouble. You should check your credit report at least once a year to find out if there are any outstanding debts or errors that need to be corrected. The wrong information can negatively affect your credit score.
6. You Co-Sign for a Loan or Credit Card
Lastly, you may think you’re doing a good deed by co-signing for a credit card or loans for your child or your college buddy. However, if they miss a bill payment or rack up a huge balance then this will have a reflection on your credit score. Ultimately, you should never co-sign for a loan or a credit card in any scenario. It doesn’t matter how trustworthy the other person is. If something goes wrong then you’ll be the one taking a hit, too.