Over 30 percent of Americans have bad credit or a credit score under 601.
Ever wonder what hurts your credit score and lowers your chances of getting a loan? Knowing what hurts your credit score can help you raise it and reach your financial goals.
Read below to discover five factors you may not be aware of that can affect your credit score.
1. Not Having Enough Credit
No credit isn’t the same thing as good credit, in fact, it’s the opposite.
Having no or little credit means that nothing gets reported to create your credit score. To qualify for a credit score, you need at least one credit card or loan that has been open for six months.
Many people avoid credit cards because they fear the associated debt. But not having a credit score will impact your ability to buy a car or house. Lenders like to see a good payment history before giving you a loan.
2. Canceling Credit Cards You Don’t Use
It may make sense to cancel old credit cards that aren’t carrying a balance. But this move is one of the things that hurt a credit score.
By canceling a credit card, you reduce your credit amount and the age of your credit history.
Keep the account open and use the credit card every few months to keep the account active. You can then immediately pay off the balance and keep your credit score up.
3. Too Many Hard Inquiries
Every time you apply for more credit, a hard inquiry appears on your credit report.
Each hard inquiry negatively impacts your credit score. These inquiry’s affect your credit score even if you don’t get approved. Not only do hard inquiries lower your score, it also gives lenders the impression that you’re desperate for credit.
People with at least six inquiries are eight times more likely to declare bankruptcy.
4. Consolidating Your Debt
Consolidating debts can lower your payments and interest rates. But it can also harm your credit score.
This forces another hard inquiry on your account and lowers your score that way. Consolidating your debt onto one credit card lowers your credit age. It also increases your debt-to-credit ratio.
But if you are able to pay off your debts quicker, this can help your credit score over a period of time.
5. Ignoring Your Credit Report
Ignoring your credit report doesn’t make it go away. In fact, being aware of your credit score can help you raise it.
When you use a credit checker, you will see a list of all open and closed accounts. This allows you to dispute any incorrect information that can harm your score.
Free credit checks can also give you reasons for a low score, then you can work to improve it.
Beyond What Hurts Your Credit Score
Once you’ve figured out what hurts your credit score, it’s time to get yours on track.
Start by checking your credit report and disputing any errors. Then work on decreasing your credit utilization ratio. Make sure to keep up on payments and watch how your score changes.
Read here to discover how to raise your credit score in only 30 days.