Actions That Wreck Your Credit Score

Sometimes it is easier to know what not to do than to know what you should do. Often you know what you should do to keep your credit score high or to improve it, but do you know which actions are sure to ruin your credit score fast?

These actions may even seem like good ideas at the time, but your credit will suffer for them. Here is a list of actions that you should not take.

Close Your Accounts

Closing credit card accounts is a good thing, right? You do not want extra credit cards lying around when you do not need them. Your goal is to pay them off and then close off the accounts.

There is a problem with this way of thinking. Your credit score is based on your amount of available credit. When you close down your credit card account then you just removed a portion of your available credit and lowered your credit score.

Your credit is partially measured as the amount of credit you have as compared to your amount of debt. When you close that account your debt is the same but your amount of available credit just dropped. It may seem like a smart move, but you just lowered your score.

Just In Case Credit Cards

Some people also think it is a good idea to have credit cards in case of emergency. They only use these cards if absolutely necessary because it is better to not use it if you do not need it. After all, you do not want to spend money you don’t have. That is how debt grows.

Credit companies may close down accounts that have been inactive for extended periods of time. The account may even still be open, but if it has not been utilized for a long enough period of time then the company can stop reporting it as part of your credit. That means that it no longer is added in as a part of your available credit and your ratio of debt to available credit can take a sudden dive.

One possible solution is to use the card regularly or even periodically in some small way. As long as you keep using the card and then paying off the balance then it will have a positive impact on your credit. You want to use it enough that the account stays open and the credit from that account is still counted toward your available credit.

Having High Balances

Having one high balance on one credit card can be worse for you than carrying lower balances on several different credit cards. The problem is that you are carrying a balance that is close to your credit limit. Strangely enough, this can even come across negatively if you pay off these high balances on a monthly basis. Lenders see the regularly high balances and see that you constantly have a high balance as compared to your credit limit. This does not give the best impression.

There are many ways to destroy your credit score. Three that you may not have known about are closing credit card accounts, having credit cards you do not use, and having high balances on your credit cards. Now that you know how these situations impact your credit, you can avoid them or at least consider the repercussions before you undertake any of these actions.

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