Top 7 Ways to Ruin Your Credit Score and How to Avoid Them

A good credit score is an important factor in the life of an individual. It can be used for many things such as getting loans, qualifying for a mortgage, etc. It can also be used as a measure of how responsible and financially stable you are.

Many people don't know the importance of maintaining a good credit score and think that it is not necessary to have one. But this is not true because it affects your life in so many ways that you may not even know about. For example, if you have a bad credit score, you will have to pay more for loans and other financial products which are offered by banks or other financial institutions.

Here are the ways you are ruining your credit Score

1. Max Out Your Credit Cards
2. Skip Payments or defaulting on Loans or Bills
3. Allowing an irresponsible person to use your credit card
4. Applying for many Credit Cards at Once
5. Closing Old or Inactive Credit Cards
6. Irresponsible Co-Signing with someone
7. Not Checking Credit Reports

1. Max Out Your Credit Cards

Maxing out your credit cards is a risky move. You are risking your credit score, your ability to get loans in the future and potentially ruining your whole financial situation.

Maxing out your credit card is not a good idea for many reasons. For one thing, you are risking your credit score. And if you are maxing out cards with high interest rates, it's likely that you will be paying even more in the long term.

It is important to be aware of your spending habits and stick to your budget, so that you do not overspend on your credit card.

2. Skip Payments or defaulting on Loans or Bills

Your payment history has a significant impact on your credit score. According to U.S. News & World Report, a single late payment can reduce a credit score by 100 points or more. 

Borrowers, on the other hand, may be able to limit the damage if they act quickly. While skipping a payment by a few days is unlikely to harm your credit, paying invoices 30 days or more late can have a negative impact on your credit.

3. Allowing an irresponsible person to use your credit card

You're responsible for any purchases made with your credit card until it's stolen. So, if you let your friend or your little sister borrow your card for pizza and she spends it all on clothes and shoes, you're responsible for the remainder, whether or not you can pay it. Adding authorised users to your account works in the same way. Make sure they're responsible borrowers if they're going to get a physical credit card.

4. Applying for many Credit Cards at Once

We all know the feeling of opening a new credit card. It's like opening a present on Christmas morning. You're excited and you just can't wait to see what’s inside. But, sometimes it can be too much too soon and you end up getting in trouble with your credit score.

Opening too many credit cards at once is not advised because it has the potential to negatively impact your credit score by about 50 points and will take time to recover from. If you're going to apply for more than one card, make sure that they are from different banks and that they have different interest rates so that you don't end up with a bunch of high-interest cards.

5. Closing Old or Inactive Credit Cards

Closing old credit cards may appear to be a sensible move, but it might really harm your credit score. Your credit history is lengthened by keeping previous credit cards open. Its better if you stick with your oldest card, & use it once in a while. rather than to get a new one.

If that’s not possible, closing a credit card can ruin your credit score nearly about 100 points, which can be regained within 2 to 3 years of proper utilisation of your credit limit & timely payments. 

6. Irresponsible Co-Signing with someone

At the time, co-signing a credit card or a loan may appear to be a good idea. You want to aid your loved one, but you're risking a lot for them. Too often, the individual you co-signed for goes rogue, stops paying, and destroys your credit.

Remember that co-signing involves accepting responsibility for the other party's failure to pay. You must be willing to step in and take over payments if you want to protect your credit.

7. Not Checking Credit Reports

It is quite simple to forget to check your credit score or to be too concerned to do so. Some argue that ignorance is bliss. Unfortunately for them, their blissful ignorance will end the day they desire to buy their first home, car, or rent an apartment.

This is one of the most serious mistakes you can make, yet it's also one of the simplest to avoid. Checking your credit score will notify you if there is any fraud associated with your identity, show you your credit score, and let you know if anything else needs to be corrected.