Whether you’re buying a car, applying for a loan, or putting down an offer on a new home, one number can loom large over any major transaction: your credit score. Unfortunately, even people with a decent handle on their personal finances can have a surprisingly difficult time getting their rating to go up and stay there.
“Credit scores are a mathematically derived value that lenders use to assess a person’s credit risk when evaluating a new credit application,” explains Jeffrey Stouffer, a certified financial advisor and financial expert with JustAnswer. “However, credit scores can also be impacted by some other factors that are not easily seen.”
Looking to get your number in the right place? Read on to discover seven hidden things can affect your credit score, according to finance experts.
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Getting rid of your credit cards too soon
Those who have managed to get out from under a mountain of debt know that finally sending in the last payment on a credit card can be incredibly liberating. In many cases, it can feel appropriate to cut ties with the company entirely. However, experts caution you might want to hold off a little while before you take scissors to plastic.
“Paying off your credit card debt is a huge milestone that deserves celebrating. But although you may be tempted to close the account once it’s paid off to avoid adding a balance back on the card, don’t,” family finance expert Andrea Woroch tells Best Life.
“The amount of time you’ve had credit—also known as credit history—impacts your credit score. So you want to keep old accounts open. Add a recurring charge and set it up to pay off in full each month to keep it active,” she suggests.
Paying your bills on the wrong dates
It’s true that regularly paying your bills and keeping your spending in check can help rein in your credit score. But according to experts, it can also come down to exactly when you’re remitting payment and how much you owe overall when you do so.
“You can also significantly boost your credit score by making sure your balance is low—or even $0—when your credit card statement closes each month,” says Robert Farrington, founder of The College Investor. “For example, if your statement closes on the 15th of each month, make a payment for the full amount on the 10th. That way, when your balance posts, it will show $0 used—which can boost your credit score.”
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Not keeping the balance on your credit cards low enough
Everyone knows that running a credit card is risky when you can’t afford to pay for what you’re spending. But even if you’re keeping your purchases in check, your overall balance might still be running a little high despite being well below its maximum—and damaging your score in the process.
“Credit scores are based on the types of credit,” explains Stouffer. “The revolving credit accounts have more impact because this type of account will always change. Credit cards can be maxed out, and this will cause scores to drop considerably and only improve when balances are brought down. Usually, less than 30 percent of available credit is the acceptable upper limit. Above that, scores drop.”
Not having a mortgage
Deciding to buy a home can be one of the most important financial decisions someone makes in their life. Of course, having a good credit score going into the process can be essential. As it turns out, experts say that taking on a mortgage can also be what boosts your credit score in the long run.
“Term loans only show payment patterns and reductions in loan balance,” Stoffer says. “The lack of a mortgage will hold the scores down because it implies a lack of permanent foundation in residence. A person can have a long clear credit history consisting of multiple credit cards, auto loans, and term loans. Some accounts can be active, some can be paid in full, and there are no late payments. But the lack of a mortgage will prevent this person’s rating from reaching the highest possible score for those reasons.”
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Having your credit score checked too often
Arguably, one of the most frustrating parts about working hard to keep your credit score up is that whenever it’s examined by a potential lender, it can have consequences on your hard-earned number. But experts say staying on top of how others check your score can be one way to keep it as high as possible.
“When you apply for credit, the lender will typically make an inquiry into your credit history. This is called a ‘hard inquiry,’ and it can have a negative impact on your credit score,” says Tommy Gallagher, ex-investment banker and the founder of Top Mobile Banks. “However, there are also ‘soft inquiries,’ which do not affect your credit score and are typically made by lenders for marketing purposes. That’s why it’s important to be aware of these hard inquiries and make sure that they are not being made without your consent.”
Gallagher points out that most personal credit score monitors use soft inquiries and can be an easy to way to monitor for unexpected hard checks that may come in quick succession. And while you may not be able to avoid applying for multiple forms of financing due to a big move or a significant lifestyle change, you can avoid applying for too many credit cards in a short timeframe.
Being the victim of identity theft or fraud
Nowadays, everyone knows that their personal information is one data leak away from winding up in the hands of someone who will use it for nefarious means. But while you can’t always control identity theft, you can keep your score much higher if you regularly monitor for such breaches—which is one helpful tip some experts say the general public doesn’t practice enough.
“If your personal information has been compromised and used to open credit accounts in your name, this can have a major impact on your credit score,” says Gallagher. “It’s important to regularly check your credit report and be vigilant about protecting your personal information to prevent this type of issue.”
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Forgetting to set up auto pay
Even though technology has made some aspects of everyday life easier, it’s also made it a more hectic place in other ways. It can be hard to sift through the daily barrage of notifications to pull out the genuinely important reminders and alerts in a sea of marketing notifications. That’s why even if you consider yourself organized when it comes to making your monthly bill payments, you could damage your credit score if you don’t automate the process.
“It’s simple: Make sure you never miss a payment,” says Farrington. “You can help ensure this by setting up auto-debit, so your payments are always paid on time. Also, remember that utilities like cell phone bills, power, water, and even rent payments can all negatively affect your credit if you miss just one payment.”
Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you’re spending, saving, or investing, always consult your financial advisor directly.