Explore how resilient your credit may be to an economic downturn

Lots of Americans are struggling with low credit scores. In fact, 53 percent of people have been rejected for a credit card, auto loan, or another type of loan because of problems with their credit.

Are you unhappy with your credit score? Are you unsure of what you’ve done that’s caused it to be so low?

If so, keep reading. Listed below are 15 things that have the potential to hurt your credit score.

1. Payment History

Your past behavior with regards to paying your credit cards will have a significant impact on your credit score. In fact, payment history makes up more than one-third of your total credit score.

If you have a habit of not paying bills on time or missing them altogether, that’s going to lower your score. Being late on or missing payments for other bills (utilities, cell phone bills, etc.) will influence it as well.

2. Applying for More Credit

Applying for more credit will increase the number of hard inquiries on your credit report. Lots of hard inquiries will lead to a lower score.

Also, if a lender sees that you have several hard inquiries in a short time frame, they’ll get the perception that you’re desperate and not in a great financial position. This can make it even harder for you to qualify for loans.

3. Transferring Balances to a Single Card

At first, transferring all of your credit card balances to one card might seem like a smart move. In reality, though, it can lower your credit score because it increases your credit utilization. This is the ratio of credit you’re using compared to the total credit you have available.

4. Errors on Your Credit Report

Sometimes, a drop in your credit score isn’t your fault. If there are errors on your credit report, that can result in a drop in your score as well. This includes things like errors in your personal information and identity data, as well as balance errors and mistakes regarding your account status (such as saying an account is closed when it’s open or vice versa).

5. High Credit Card Balances

Do you owe a lot of money on one or more of your credit cards? Are you only making the minimum payment each month? If this is the case, your credit score is going to take a hit. A maxed-out card can reduce your score by anywhere from 10 to 45 points.

6. Closing Old Credit Cards

You might assume that the best thing to do once you’ve paid off a card is to close the account. This can reduce your score, though, because it can throw off your credit utilization ratio. It alters your credit history, too.

7. Requesting a Credit Limit Increase

If you request a credit limit increase, your credit card issuer is likely going to pull your credit to see if you can handle a higher limit. This, in turn, can lead to a reduction in your credit score, especially if you request a limit increase on several cards at once.

8. Cosigning a Loan or Credit Card with Someone Else

When you cosign a loan or credit card application for someone, there’s a chance your credit score can be affected. If that person doesn’t make payments on time or defaults on their loan altogether, your credit takes a hit. That’s why it’s important to be selective about who you decide to help out in this way, especially if you’re also working on building up your own credit score.

9. Credit Age or Credit History

If you have a short credit history (the amount of time you’ve had credit accounts open), there’s not a lot of information for lenders to work with. As a result, you may have a low credit score until you’ve had a chance to prove that you can pay bills on time and use credit cards in a responsible way.

10. Account Mix

There are two main types of credit accounts that make up your account mix or credit mix: revolving debt and installment debt. Credit cards that you use and pay off each month are an example of revolving debt, and installment debt includes loans like auto loans or a mortgage payment. A mix of both types is best for building a healthy credit score.

11. Hard Inquiries

As we’ve mentioned, hard inquiries can have a negative effect on your credit score.

A hard inquiry occurs when you apply for a new credit card or loan. A soft inquiry, on the other hand, has less of an effect and occurs when you check your own credit score or when a lender checks your credit on their own.

12. Applying for Too Many Credit Cards

Remember, every time you apply for a new credit card, a hard inquiry takes place. If you apply for too many credit cards at once, you’ll have lots of hard inquiries and, as a result, a reduction in your credit score.

13. Collections and Charge-Offs

If a creditor sells your debt to a third party or hires someone else to collect a payment, your debt has been sent to collections. If a creditor takes an unpaid debt off its books (usually when it’s past due by 180 days), it’s known as a charge-off. Both of these are bad for your credit score, especially if they’ve happened recently.

14. Bankruptcy

One of the worst things you can do for your credit score is to file for bankruptcy. Sometimes, it’s the only option. However, it will lead to a significant reduction (over 100 points) in your score and stays on your report for up to 10 years.

15. Foreclosure

A foreclosure also has a serious effect on your score. It can cause your score to drop by up to 160 points and will stay on your report for up to seven years.

Start Working on Your Credit Score Today

As you can see, there are lots of things that can affect your credit score and your financial health. If you’re looking to improve your credit and get on top of your finances, be sure to do what you can to avoid these common issues.

Check out some of the other resources on our site, too, for more finance-related advice