Everyday Mistakes That Can Damage Your Credit Report

List: Posted: 01/28/11

When trying to maintain or rebuild your credit score, avoiding major financial disasters like bankruptcy, civil judgments, repossessions and foreclosures is a must.  However, there are other more every-day transactions that can compromise your credit score.


To begin with, you should always pay your minimum balance by the requested date.  Not only does this protect you against delinquency status, but it also spares you from late payment charges.  Late payments do count against you and will appear on your credit report sooner than you think.  Payment history determines 35% of your total credit rating.


If you have the available finances, pay off large balances immediately or as soon as possible.  Maxing out your balance on a regular basis can damage your score.  Beware of closing credit cards or of having too many cards. 


Ideally, you want to have a few lines of credit open over a long period of time, and have more available credit than debt.  Do not apply for more cards than you need, and remember in-store cards do count against your credit score.


Increasing your balance on a credit card can also count against you.  While it’s smart to keep up to date on your credit report, multiple credit report requests can actually lower your score.  Too many third party reviews (which happen every time you apply for a credit loan) can also lower your credit.  In fact, a single third party review can drop your score by five points!


Lastly, overdrafting your card limit can greatly reduce your score, with some banks as much as 100 points.


In all aspects of your financial life, an ounce of prevention is better than a ton of cure. Exercise caution when making credit transactions.  A good financial reputation follows you everywhere, so your hard work and diligence will pay off in the end.


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