What is the most common mistake that people make that hurts their credit score?

What is a credit score? What is the most common mistake that people make that hurts their credit score? A credit score is an important scale employed by money lenders and must be kept at a good score at all times.

What is a credit score? What is the most common mistake that people make that hurts their credit score? A credit score is an important scale employed by money lenders and must be kept at a good score at all times.

What is Credit Score and how is it calculated?

A credit score is a numerical expression that ranges between 300-850 obtained by analyzing the credit file of the person to determine how credit-worthy they are.  This is a very useful score as the better the scores the more satisfied and willing borrowers and established lenders are to open you to more lending opportunities.

In simple terms, a bad credit score will mean that individual did not repay some loans in time or defaulted and may not be trusted to access more funds.

A good example of a credit score is the FICO and Vantage scores where 800-850 depicts an excellent rating for FICO and 750-850 for Vantage credit scores. People with 300 and below are considered very poor.

How credit score is calculated

The scores are calculated using factors like the individual’s credit history, total debt levels, number of open accounts, repayment history, etc.

Let’s take FICO, for instance, the payment history contributes 35% of the credit score, the debt 30%, length of credit history 15%, New credit is 10%, credit mix, and other factors contribute 10%. 800 and higher is the best score obtainable and 579 and below are considered very poor.

This information is sourced mainly from the credit bureaus and individuals can get a copy from each of the 3 main credit agencies or by opening a myequifax account to have 6 free credit reports in 12 months.

From what we have said so far, it is established that credit scoring is a good yardstick that must be kept at a good rating for future lending opportunities. We must consider the factors that affect our scoring and common mistakes that affect credit scores badly.

The most common mistakes people make that hurt their credit score

1. Delayed loan Repayment

Lenders frown at debtors who pay late and may not trust them for future borrowing even if they eventually pay. People you owe money, landlords who own your rented apartments and storage facilities, and your creditors may report you to the credit agencies for paying late and this may affect your credit score badly.

Too many factors can affect your scores, a small library fee that you fail to pay may drop your score, same way protecting yourself from bank overdraft by drawing your credit lines can affect you badly.

When you repay your debts in time, you look appealing to lenders because it reflects on your credit score profile.

2. You have too many debts to pay

Even when you have a credit card that allows you to borrow freely, there is always a limit you should maintain to be on the good books of credit bureaus.

Borrowing beyond your credit limits is a bad way to go. If you have too many debts you affect your credit scores negatively. The best you should do is to keep your borrowing between 10-30% of your credit limits. This way the debts are easier to repay.

Having high-interest debts hanging on your neck is a bad way to go, it hurts you badly and ruins your future access to credit facilities.

3. Terminating your old accounts

If you close your old credit accounts for whatever reasons you bear the risk of losing your untapped credit limits by burning out your credit utilization ratio.

The credit utilization ratio is a measure of the amount of credit limit you have utilized. For example, you borrowed £10000 when your credit limit is $400000 which is 25% of your credit limit utilized, and decide to close some of your accounts reducing your credit limit to $200000.

Despite succeeding at reducing your credit limit to $200000 to reduce the urge to borrow too much, your credit utilization ratio climbs to a whopping 50% meaning you have used 50% of your credit limit.

This negatively affects your credit scores, no lender will give credits to someone who has a lot on his neck to pay just like we stated earlier as a common mistake people make that hurts their credit limit.

Old accounts are valuable so don’t close them. Closing them will lower the average age of your credit accounts. No matter how hard you try, your total credit history is not under your control but you can take a firm decision to never close your old accounts and this can make a difference to your scores.

4. Getting too many credit cards:

Too many new credit card accounts created can hurt your scores too, each time you apply for a new account and lenders draw up your credit scores and this can negatively affect it if done too many times in a short period as compared to when it’s done over a long period it may not count too much.

5. Too many bounced checks:

This can also hurt your scores badly as collection agents can come up against you and puck holes in your credit scores. SO it is better to not issue checks that are very likely to bounce for your good. People do this to buy some time but it can be bad for your lending profile.

6. Signing a loan for someone

Be it a loved one or a business partner, co-signing a loan can affect you negatively or positively, if they are repaid early your credit scores improve, and if they are repaid late your credit scores drop

7. Assuming your scores are good

It is wise to constantly review your credit scores. Even when you have lived by the rules and paid off all your debts early you shouldn’t disregard checking your reports daily.

These reports are done by humans and can entertain some errors occasionally that can be corrected if you report them.

Ensure to look over your scores again especially when you have an impending loan to get.

8. Borrow only when you need it

You need to be a responsible manager of your money by borrowing only what you need and can afford to repay.

Borrowing above your means, will culminate in non-repayment and ruin your chances of success with future loans. Loans are not meant to fuel your appetite for extravagance.

When you spend on your needs and not on things you merely want makes you a good money manager. Living within your means will prevent you from borrowing too much and won’t hurt your credit scores.

9. Not taking loans

If you don’t utilize credit facilities there will be no history to judge how faithful you are with repaying loans. Lenders will find it hard to trust you because you have not built that trust that takes time to build from your loan repayment history.

While we encourage you to avoid taking unnecessary loans, it is also not good to avoid them as you need to build your creditworthiness in case you need credit in the future.

10. Getting credit cards that you don’t need

Signing up for a credit card when you don’t need them and don’t fully understand credit limits and the merits of early repayment will take your credit scores down the drain.

You need to know the basics of finance and loan repayments before applying for a credit card. Don’t be lured into getting credit by co-signing with someone when you know you are not ready for one yet.

11. When you pay only the minimum

Loans have minimums, that you should pay and it is spread over a period of time. If you pay only the minimum interest accumulates over time and makes it harder for you to pay off the debt and this hurts your credit scores.

Paying only the minimum means you can’t balance your utilization ratio and the entire balance of the loan can’t be lowered.

What we mean by paying the minimum is say for someone who owes $100000 and an interest of 13%, the minimum payment will be around $2000. If you continue paying at the minimum, it will take 6 years or more to repay and the interest on the loan keeps soaring.

12. Not keeping track of your accounts

A few reported cases of identity theft can wreck you. Make sure to protect any account you opened including your personal information, banking details, social security, and credit card numbers.

These details need to be guarded jealously as someone might secretly be using your identity to take loans that they can’t repay and this negatively affects your credit scores.

How to avoid these mistakes that hurt credit scores

We have carefully answered, what are the common mistakes that hurt credit scores but what is left is how these mistakes can be avoided since we can’t rule out the odds of wanting credit at some points and so it is important to maintain a good credit score at always. Below are some ways to avoid these shortfalls.

1. Pay up loans early:

We have highlighted what late payments can do to your scores and won’t hesitate to remind you what early payments can do for you. Lending agencies are happy when we repay loans early and this improves credit scores very well.

2. Pay up your high-interest loans

If you can pay off your high-interest loans fast, it helps you lower your debt burden and improves your credit utilization ratio and in turn, makes your credit scores look better in the eyes of lenders.

The idea of paying the low-interest loans first is bad and will only drag you deeper into debt.

3. Avoid closing your old accounts

Keeping your old accounts is a good habit, it maintains the average age of your credit and gives you a better credit utilization ratio that will entice lenders to give you more.

4. Avoid too many cards

You don’t want potential lenders pulling up your credit scores which can affect them negatively. Avoid the temptation to apply for too many credit accounts.

5. Say goodbye to bounce checks

Don’t get into problems with collection agencies by intentionally issuing too many bounced checks. It is not good for your financial future and can ruin your credit worthiness.

6. Never co-sign loans

If you are getting a loan for yourself it’s fine since you are certain you can repay them but when it comes to co-signing for loved ones who don’t know what it means to keep a good credit s score, I say nay. This should be one of the best pieces of advice you should imbibe on how to improve your credit score.

If the loved one failed to pay the loans it robs off on your scores and if the pay early you get rewarded for early repayment. So count the cost before repaying that co-signing that loan.

7. Never assume things

Access your credit reports annually from the credit agencies, don’t always assume your credit scores look good enough.

There could be mistakes that you can point out by getting a copy of your debt report that can be obtained at no cost.

8. Avoid lending too much

Borrow only when you need it, remember the more you repay the better your credit scores.

If you want to get out of debt then make sure you borrow only when you need it.

9. Don’t live above your means

Never borrow to fuel an extravagant lifestyle; don’t borrow to live like a king when you are just a palace guard. Live the easy life, go for things you can only afford and within your means. By so doing, you won’t have too many unpaid debts that will wreck your credit scores.

10. Take a loan

Despite how much we have advised you to reduce how much you borrow, it is equally bad to avoid loans entirely. Your credit scores are calculated bearing in mind your loan repayment history as well as other factors. I encourage you to take a loan today and ensure you pay up early.

11. Get only credit cards that you need and acquire financial education

Get credit cards only when you are prepared with the financial knowledge to handle them. Make sure you master how to use it and how to keep a good loan repayment history. And also learn how to keep your credit limits within the best credit utilization ratio.

Never go for a credit card account when you are not fully ready.

12. Avoid paying only minimum

If you want to get free from debt and maintain a good loan repayment history then you should strive to pay more than the minimum. This reduces the term required to service the loan, and the interests and gives you a higher credit s score.

13. Guard your personal information serious:

Identity theft can wreck you and ruin your future opportunities with potential lenders.

Make sure you secure your credit cards, social security number, bank details, and other personal information very well to avoid activities of unknown elements affecting your scores.

How to improve your credit score

We have listed a good number of mistakes that affects credit scores and how they can be avoided. What is now left is how to improve your credit scores quickly so you can look good to potential lenders.

Some of the things listed are also ways viable ways to improve your credit scores but let’s remind us of some things you can do that impact quickly on your reports.

1. Reduce your revolving credit balance

As we earlier mentioned pay more than your minimum payment for each month, this reduces your revolving debt, interests, and credit utilization ratio. It also increases your credit score.

Your payments are reported by credit card companies monthly other agencies may report them earlier so it is good to pay up in time to be on the good books of lenders.

2. Have your credit limits increased

This can be achieved in two main ways; by opening a new account or asking your lending agency to increase the credit limit on your current card.

By increasing your credit limits, your overall credit utilization ratio drops especially if you are not borrowing more as your credit limits increases.

If you want this strategy to improve your credit score make sure increases in credit limits don’t amount to spending more on things that you want but don’t need.

Applying for new cards can also negatively affect your credit score but helps improve your utilization ratio, so the onion is on you to decide which is better for your financial future.

If you decide to go the route of applying for new cards try not to do I in a very short interval as the impacts are worse.

3. Always look out for errors on your credit report

We talked extensively about this in the preceding paragraphs, never let 12 months go without scrutinizing your reports. Who knows you might find some errors that’d save you some good dollars.

A good dispute that pulls through can tremendously improve your credit scores. 

With about 25% of American citizens identifying errors on their credit reports, it is sure proof that reporting these errors is a good way, how to improve credit scores.

4. Look out for debts that you paid off that are still reflecting on your reports

Having these negative entries removed can be life-saving, also make sure to pay all your outstanding debts and you will be amazed at how well your credit scores improve. It may mean working more jobs and cutting down on luxury.

Do whatever it is that will help you get free from debts, provided it is legal and doesn’t sink you deeper into debt.


What are the common mistakes that people make that may hurt their credit scores badly? Late repayment, borrowing above means, identity thefts, errors, and co-signing loans are some of the culprits which can be avoided.  We hope you learn from our possible solutions to avoid these mistakes and follow our guide on how to improve your credit scores.

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