By now, there’s a good chance you know the big line items that can tank your credit score — bankruptcy, foreclosure, tax liens. But there are also some off-the-beaten-path ways you can damage your credit.
The exact effects will vary, depending on your full credit profile. (You can see where you stand by viewing your free credit report summary, updated every 14 days, on Credit.com.) With that in mind, here are a few potentially unexpected credit-score killers.
1. Closing All Your Credit Cards
Your intentions may be good, particularly if you’ve racked up large amounts of credit card debt before, but closing all your credit card accounts at once could severely damage your credit utilization rate — the amount of debt you are carrying versus how much credit has been extended to you. It could also ultimately lower the age of your credit. You might want to consider keeping a card or two open, but on ice (figuratively or literally) to minimize collateral damage to your score.
2. A Sudden Spate of Bad Behavior
The saying “the bigger they are, the harder they fall” applies to most credit scoring models, so if your score in good shape, be wary of sudden bouts of bad payment behavior.
“If a consumer who has previously made their payment obligations on time month-in and month-out suddenly starts missing payments left and right, the impact on their score could be substantial,” Ethan Dornhelm, senior principal scientist at FICO, said in an email.
Similarly, running up a bunch of credit card balances simultaneously can severely hurt your credit. Your credit utilization comes into play again here, only this time, in lieu of lowering your total credit, you’d be raising your debt levels. For best credit scoring results, you want to keep the amount of debt you owe below at least 30% and ideally 10% of your total credit.
3. Opening Too Many Accounts at Once
You also want to slowly add new credit accounts over time, because opening up a slew of credit lines, particularly different types of debt, can damage your credit. You could incur lots of hard inquiries on your credit report, which may hurt your score, Bruce McClary, vice president of public relations and external affairs at the National Foundation for Credit Counseling, said. And you also risk giving lenders the impression you’re over-borrowing.
“There’s a lot of stuff that could start happening if you go down the road,” he said. For instance, misuse of those new accounts could weigh your credit down indefinitely.
4. Co-Signing a Loan
Co-signing on a loan will not hurt your credit, but you could incur big damage if you stop paying attention to the account and the person you co-signed for doesn’t make good on their obligations.
“You’re not the one using that account, but the same payment history is going to show up on your credit report,” McClary said. And, yes, any missed payments, high debt levels, or, worse, defaults, charge-offs and/or collections are going to impact your score.
To preclude problems, “be careful of who you’re putting in control of your financial future,” McClary said. And keep an eye on any accounts you may have co-signed.
5. Ignoring Divorce Debts
The courts may have found your ex-spouse liable for the debt they racked up on joint account, but your credit will still be affected if they decide not to make payments. (Ditto for any debts that are currently being contested in your divorce proceedings.)
“The creditors don’t care about the divorce decree, so if your credit is important to you, make payments if the ordered person is not and take them back to court for the money owed,” Thomas Nitzsche, media relations manager for ClearPoint Credit Counseling Solutions, said in an email.
Remember, no matter how the damage gets done, there’s are ways to fix your credit. You can generally improve your scores by paying down high credit card debts, contesting inaccuracies (you can go here to find out how to dispute errors on your credit reports) and building long-term smart spending habits, like making all of your loan payments on time. And, if your credit is in really rough shape, you may want some outside help. You can read more on how to find a reputable credit repair company here.
More on Credit Reports & Credit Scores:
- How Do I Dispute an Error on My Credit Report?
- What’s a Bad Credit Score?
- How Credit Impacts Your Day-to-Day Life