Hurts: Missing a bill payment
Your credit score is based on your ability to repay what you borrow and pay your bills on time. This means that if you have a poor payment history you will have a poor credit score. In order to build good credit, one must stay on top of bills and credit card payments. Missing a single payment can harm your credit score for up to 24 months, making it more difficult to borrow money in the future.
Helps: Having a credit card open for a long time
Credit Bureaus reward those with long-term credit accounts. Opening and closing multiple credit cards within a short time frame will harm your score because it shows inconsistency in your history. When you open your first credit card, keep it active as long as possible even if you don’t use it. By closing a credit card account, it will erase all of your positive payment history with that card.
Hurts: Defaulting on a car loan
Unpaid auto loans will go to collections and show on your credit report. Avoiding payments that are owed on a loan is one of the biggest mistakes you can make regarding your credit score.
Helps: Paying your credit card bill in full every month
When you continuously make payments in full, it helps your credit score enormously by showing you are capable of making on-time payments on a regular basis. Paying in full also saves you from accruing interest charges and losing more money down the road.
Hurts: Applying for multiple credit cards within a short time period
Applying for multiple credit cards within a short time period will count as multiple hits on your credit history. This is because when you apply, the company has to check your credit score to make sure you will be able to make payments on it in the future. When companies look up your report and score for a new loan, it is known as a hard hit to your credit. A hard hit will affect your credit score negatively, especially if it is happening frequently.
Helps: Keeping a low balance on your credit card
Just because you can max-out your credit card, doesn’t mean you should. Regularly carrying high credit balances will bring down your credit score. Instead of having large charges on your card, try to keep your balance between 15-20% of your credit card max. For example, if your credit card limit was $1,500, keeping your balance around $225 would be ideal.