15 Things That Hurt Your Credit Score

Your credit score is one of the most important factors of your financial life. Banks use it to decide whether to give you a credit card or loan. Some service providers use it to determine whether you should pay a security deposit. Car insurance providers consider your credit score when setting your insurance rate. While it's important to know what things help you build a good credit score, you also have to know the actions that could hurt your credit score. Here are 15 of them.

Paying Late

Man with head on table paying bills in home office
Mark Bowden/Vetta/Getty Images

Thirty-five percent of your credit score is your payment history. Consistently being late on your credit card payments will hurt your credit score. Pay your credit card bills on time to preserve your credit score.

Not Paying at All

Completely ignoring your credit cards bills is much worse than paying late. Each month you miss a credit card payment, you're one month closer to having the account charged off.

Having an Account Charged Off

When creditors think you're not going to pay your credit card bills at all, they charge off your account. This account status is one of the worst things for your credit score.

Having an Account Sent to Collections

Creditors often use third-party debt collectors to try to collect payment from you. Creditors might send your account to collections before or after charging it off. A collection status shows that the creditor gave up trying to get payment from you and hired someone else to do it.

Defaulting on a Loan

Loan defaults are similar to credit card charge-offs. A default shows that you have not fulfilled your end of the loan contract.

Filing Bankruptcy

Bankruptcy will devastate your credit score. It's a good idea to seek alternatives, like consumer credit counseling, before filing bankruptcy.

Having Your Home Foreclosed

Getting behind on your mortgage payments will lead your lender to foreclose on your home. In turn, the late payments will hurt your credit score and make it harder to get approved for future mortgage loans.

Getting a Judgment

A judgment shows you not only avoided your bills, the court had to get involved to make you pay the debt. While they both hurt your credit score, a paid judgment is better than an unpaid one.

High Credit Card Balances

The second most important part of your credit score is the level of debt, measured by credit utilization. Having high credit card balances (relative to your credit limit) increases your credit utilization and decreases your credit score.

Maxed out Credit Cards

Maxed out and over-the-limit credit card balances make your credit utilization 100%. This is least ideal for your credit score.

Closing Credit Cards That Still Have Balances

When you close a credit card that still has a balance, your credit limit drops to $0 while your balance remains. This makes it look like you've maxed out your credit card, causing your score to drop.

Closing Old Credit Cards

Another component of your credit score, 15%, is the length of your credit history - longer credit histories are better. Closing old credit cards, especially your oldest card, makes your credit history seem shorter than it really is.

Closing Cards With Available Credit

If you have several credit cards, some with balances and some without, closing those credit cards without balances increase your credit utilization.

Applying for Several Credit Cards or Loans

Credit inquiries account for 10% of your credit score. Making several credit or loan applications within a short period of time will cause your credit score to drop. Keep applications to a minimum.

Having only credit cards or only loans

A mix of credit is 10% of your credit. When you have only one type of credit account, either loans or credit cards, your credit score could be affected. This factor mostly comes into play when you don't have much other credit information in your credit history.