3 Ways You Could Be Hurting Your Credit Score Even If You Pay Your Bills On Time

If you pay make regular credit card payments that are well above the minimum, and no one is hassling you about outstanding bills you might assume that your credit score is getting healthier or at least maintaining its current level. But there are some mistakes that consumers don’t even realize they’re making that could be hurting their FICO numbers.

Credit.com has a good roundup of ways people “accidentally” hurt their credit scores. Here are the ones we found the most intriguing:

1. Not Paying Attention To Credit Balances
You don’t have to be in deep debt to creditors to harm your credit score, especially if you don’t have a substantial line of credit to begin with.

Your “amount of debt” is the second-biggest chunk of your FICO score (after your payment history), accounting for about one-third of the calculation, and your debt-to-credit ratio has a big impact on this figure.

If that ratio goes higher than 30%, it’s negatively impacting your score. So someone with $1,000 in debt and $10,000 in credit isn’t hurting themselves, but if that same person only has $3,000 in credit, their credit score is worse for it.

[CORRECTION: We did not mean to imply in the above paragraph that a 30% ratio is a definitive dividing line between improving or harming your credit score. The goal should always be to have the lowest debt-to-credit ratio.]

This is why you should be cautious when closing out credit card accounts even if they don’t carry a balance. The loss of that available credit pushes your debt-to-credit ratio higher.

2. Co-Signing Loans
We’ve told you horror stories in the past of family members left on the hook for loved ones’ loans after the borrower died or became unable to pay, but if that borrower misses a payment or comes up short on payments your credit score may start sinking without you even realizing why.

3. Applying For Too Many Lines Of Credit
It can be so tempting to take advantage of promotions like 0% financing or cards with huge rewards bonuses for new members. Even if you have no problem paying off the purchases made with these new lines of credit, merely applying for these accounts results in “hard pull” inquiries of your credit report, which accounts for 10% of your score.

That doesn’t mean you shouldn’t sign up for lines of credit; just be aware that each application results in a short-term ding on your score.