15 Bad Habits That Are Destroying People's Credit Score

Navigating the financial landscape can be tricky, and the middle class often finds themselves inadvertently damaging their credit score. These common mistakes can have lasting effects, from overlooking small debts to mismanaging credit cards.

1. Missing Payments

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Life gets busy, and bills can slip through the cracks. However, even one missed payment can hurt your credit score. Lenders see this as a sign you might not be reliable. It’s like forgetting a friend’s birthday; do it once, and they might forgive you, but it leaves a mark.

2. High Credit Card Balances

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Maxing out credit cards is a red flag for creditors. It screams that you might be living beyond your means. Keeping your balances low shows you’re in control, like not filling your plate too high at a buffet to show you know your limits.

3. Applying for Too Much Credit

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Every time you apply for credit, it triggers a hard inquiry into your report. It’s akin to asking too many people for a favor; eventually, it looks bad. Spread out your credit applications to avoid this pitfall.

4. Ignoring Credit Reports

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Not checking your credit report is like not checking your face in the mirror before leaving the house. Errors can pop up, and you won’t catch them if you’re not looking. Regular checks can help you spot and fix mistakes before they do lasting damage.

5. Closing Old Credit Accounts

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It might feel tidy to close old credit accounts, but it can shorten your credit history and lower your score. It’s like throwing away old photo albums; you lose a part of your history. Keep those old accounts open to show a long, stable credit relationship.

6. Co-Signing Loans

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Lending a helping hand by co-signing a loan feels good, right? But, if the primary borrower misses a payment, your credit score takes the hit too. It’s like being in a two-seater bike; if one stops pedaling, both slow down.

7. Not Using Credit Cards Wisely

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A credit card unused is like a car left in the garage. It seems safe, but over time, it can harm your credit score. Small, regular purchases followed by prompt payments keep your credit history active and healthy.

8. Frequent Job Changes or Job Loss

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Job hopping might show ambition or the search for a perfect fit. However, lenders see it as instability. Consistent employment is viewed as a sign of financial stability, making you a safer bet for lenders.

According to an article in the National Library of Medicine income disruptions, particularly from job loss, can lead to increased use of unsecured credit among the middle class.

9. Overlooking Library Fines and Parking Tickets

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Small fines and tickets seem like minor nuisances. Yet, when unpaid, they can be reported to credit bureaus. It’s like a small leak in a boat; over time, it can cause a big problem.

10. Only Having One Type of Credit

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Diversity isn’t just important in life; it’s crucial for your credit too. Relying solely on credit cards or just a single loan limits your credit mix, which can affect your score. It’s like eating only apples for nutrition; you miss out on essential nutrients.

11. Delaying Medical Bill Payments

Sometimes, medical bills get pushed to the bottom of the pile. However, once a medical bill goes to collections, it can leave a scar on your credit report. It’s akin to a small wound turning into a significant infection if left untreated.

12. Using Rent-to-Own Services

Rent-to-own deals might seem convenient for getting what you need now and paying later.

However, these agreements can be fraught with high interest and fees, leading to payments that are missed or late. It’s like a balloon that slowly deflates, pulling your credit score down with it.

13. Excessive Online Shopping

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Online shopping, with its ease and convenience, can lead to unexpected debt accumulation. Small, frequent purchases add up, and if not managed, can overwhelm your budget. As if a cup is filling drop by drop until it suddenly overflows.

14. Ignoring Small Debts

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It’s easy to brush off small debts as insignificant. Yet, just like a single termite can signal a much larger infestation, a small, unpaid debt can indicate deeper financial issues, attracting the attention of credit agencies.

15. Not Diversifying Financial Institutions

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Sticking with one bank for everything might seem loyal, but it limits your financial flexibility and credit variety. It’s like eating only from one food group; you miss out on the benefits of a balanced financial diet.