Credit scores play a crucial role in our financial lives, impacting our ability to secure loans, mortgages, and even rent an apartment. While we may be mindful of common factors like late payments and high credit card balances affecting our credit score, there are some surprising habits that could be secretly damaging it without us even realizing. Understanding these behaviors can help us make more informed decisions to maintain a healthy credit score.

Credit scores are calculated using a blend of factors, including payment history, credit utilization, length of credit history, types of credit in use, and recent credit inquiries. Most people know that paying bills on time and avoiding excessive credit card debt are essential for maintaining a good score. But some lesser-known habits can be just as impactful. By being aware of these lesser-known pitfalls, you can take proactive steps to safeguard your credit profile.

Maxing Out Credit Cards

One of the more obvious yet commonly overlooked habits that can negatively affect your credit score is maxing out credit cards. This habit raises your credit utilization ratio, which is the amount of credit you're using compared to the total credit available to you. The credit utilization ratio accounts for about 30% of your overall credit score, so consistently using a high percentage of your credit limit can damage your score significantly. Aim to keep your credit utilization below 30% on each card as well as across all cards combined. For example, if you have a total credit limit of $10,000, try not to use more than $3,000 at any one time.

High utilization rates signal to lenders that you might be relying too much on credit to fund your lifestyle, which could indicate financial instability. Keeping balances low can prevent this impression, making you a more attractive candidate for loans or lines of credit.

Additionally, high utilization could increase interest payments, trapping you in a cycle of debt. To avoid these pitfalls, make it a habit to pay down your balances whenever possible or spread charges across different cards.

Ignoring Credit Report Errors

Many people assume that their credit report is automatically accurate, but mistakes on credit reports are surprisingly common. Errors can range from incorrect personal information to inaccurate balances, or even accounts that don’t belong to you at all. Each of these can harm your credit score. Regularly reviewing your credit report for inaccuracies is essential; by law, you’re entitled to a free report annually from each of the major credit bureaus. Checking for and disputing any mistakes ensures your credit score accurately reflects your credit history.

Ignoring errors can lead to unnecessary complications. For example, a missed payment that wasn’t actually missed could drag down your score and might prevent you from getting favorable terms on a loan or credit card. If you spot an error, file a dispute with the credit bureau, providing any relevant documents to back up your claim. It may take a few weeks, but clearing these inaccuracies can have a noticeable effect on your score.

Closing Old Credit Accounts

Closing old credit accounts may seem like a responsible step, especially if you don’t use them anymore. However, closing an account can reduce the length of your credit history, which accounts for 15% of your credit score. Credit bureaus like to see a longer credit history, as it indicates stability and responsible credit management. Even if an old account has a zero balance, keeping it open can boost your score by demonstrating a longer, more stable credit history.

When you close an account, your total available credit decreases, which can increase your credit utilization rate. If you have multiple credit accounts but close one or two, the overall percentage of credit in use can increase, even if your spending habits haven’t changed.

Instead of closing old accounts, keep them open with a zero balance or use them for small purchases now and then, paying them off immediately. This strategy maintains your credit history length and helps you avoid accidentally raising your credit utilization.

Frequent Credit Applications

Each time you apply for a new credit card, loan, or line of credit, a hard inquiry is added to your credit report. This hard inquiry remains visible on your report for about two years and can affect your score for up to a year.

Multiple hard inquiries within a short timeframe can lower your score by several points, especially if lenders think you’re attempting to take on more debt than you can manage.

If you need new credit, try to limit applications and shop around within a short period. Some credit scoring models combine inquiries made within a short timeframe, such as 14 to 45 days, and count them as one inquiry when you’re shopping for a loan. This practice, called “rate shopping,” is most common with mortgage and auto loans, not credit cards. By planning strategically, you can avoid unnecessary inquiries and protect your credit score.

Not Using Your Credit Card

Many people are hesitant to use their credit cards, fearing that using them could lead to overspending or debt. However, not using your credit card at all can have a negative impact. Lenders want to see that you’re capable of responsibly managing credit, and consistent inactivity might lead them to close the account or reduce your credit limit. A closed or reduced account affects your credit utilization and reduces the total amount of credit available, which can hurt your score.

Even if you’re not a frequent credit card user, consider making small, manageable purchases each month and paying off the balance in full. This approach shows lenders that you can use credit responsibly and have the ability to repay what you owe. It’s a good practice for building and maintaining a positive credit history without accumulating debt.

Ignoring Medical Bills and Non-Traditional Credit

Medical bills, phone bills, and even certain subscription services may not seem like they would affect your credit score, but unpaid bills can be reported to collection agencies, which can damage your credit. While not all non-traditional debts directly affect your score, accounts sent to collections definitely do. Many people overlook medical bills, thinking they’re handled separately from other types of credit, but even these unpaid bills can end up hurting your credit score.

If you have unpaid bills, prioritize paying them as soon as possible, or consider negotiating payment terms. Some healthcare providers offer payment plans that won’t impact your credit as long as payments are made on time. Additionally, some newer scoring models are starting to include positive rent and utility payment histories in credit scores. If you’re a renter, ask your landlord if they report payments to the credit bureaus, as it can be an additional way to build credit.

Co-Signing Loans or Credit Cards

Co-signing a loan or credit card might seem like a kind gesture for a friend or family member, but it comes with significant risks to your credit. When you co-sign, you’re agreeing to be responsible for the debt if the other party defaults. If they miss payments or default entirely, it can have a severe impact on your credit score, as the missed payments will appear on your report.

Before co-signing, consider whether you’re willing and able to assume responsibility for the loan if necessary. Even one missed payment can harm your score, so it’s crucial to ensure the borrower has a reliable repayment plan. If you choose to co-sign, stay in contact with the borrower to keep tabs on the account’s status and avoid surprises.

Maintaining a strong credit score involves more than just paying bills on time and keeping debts low. By being mindful of these often-overlooked factors, you can protect your credit score and make informed financial choices. Monitoring your credit report regularly, keeping utilization low, and understanding how each financial decision impacts your credit score will keep you on the path to financial security.