Some credit score killers are hard to avoid, such as missing a mortgage payment because you lost a job or maxing out your credit cards because you’re deluged with medical bills. But many of the most common credit blunders are simple mistakes that are easy to dodge.
Here are five credit mistakes you have no excuse for making — no matter what shape your finances are in.
Forget to Pay Your Bills on Time
You could have all the money you need to pay off your loans, but if you don’t keep track of when your bills are due, you could easily dent your credit score with just one accidental 30-day late payment. If you miss a bill by just a few days, your bank may not report that late payment to the credit bureaus. But it could still ding you with a painful late payment charge. Many credit cards, for example, charge late payment fees as high as $38 for repeat offenders. If you frequently space out about your bill payments, take advantage of your bank’s automatic payment service so you can be sure that you at least paid the minimum amount due. Many banks also offer email and text reminders so you have no excuse for forgetting your monthly payment.
Prioritize Other Loan Payments Over Your Credit Card Bills
Many people who are struggling to pay their bills prioritize bigger loan payments, such as personal and auto loans, over their credit cards, according to the credit reporting agency TransUnion. As a result, late payments on credit cards tend to be more common. But skipping out on a credit card bill just because your finances are tight is a mistake. Most credit cards charge a minimum of just 1 percent of your balance, plus any interest you incurred, or 2 percent of your total balance. So, for example, if you owe $1,000 on a card that charges a minimum of 2 percent of the total balance, you’d be expected to pay just $20 — which is not much more than the cost of a large pizza. If you can afford to splurge on a Meat Lovers’ Supreme, you can afford to pay your credit card.
Toss or File Your Bills Without Looking at Them
It can feel like a chore to comb through your bills for incorrect or mysterious charges. But don’t put it off just because it’s boring. You could wind up paying for a charge you didn’t make, or miss out on your chance to dispute an incorrect charge from a merchant. The Fair Credit Billing Act gives you the right to dispute merchant billing errors, such as incorrect or double charges… But you have to file a dispute within 60 days to take advantage of the protection. (You have a bit longer if the unauthorized charge is from someone who stole your credit card details.)
But you can’t dispute a charge if you never even look at your bill, and you also might remain oblivious to the fact that someone stole your credit card. It might be boring, but read your bill.
Ignore Your Credit Reports and Scores
You also have the right to view each of your credit reports from the big three credit reporting companies — Experian, Equifax and TransUnion — at least once per year, for free. But if you don’t take advantage of this yearly benefit, you may never know if credit report mistakes or unauthorized accounts are unfairly harming your credit score. To obtain your free reports, visit annualcreditreport.com. You can also keep tabs on your credit scores for free by taking advantage of free credit score services offered by your credit card. And you two such services — Discover’s CreditScoreCard and Capital One’s CreditWise — let you view your scores even if you aren’t a customer.
Close an Old Credit Card Account
If an old card is collecting dust in your wallet, you may be tempted to close the account and toss it. But unless you’re paying a big annual fee, it’s a mistake to close your card. Closing a credit account could unexpectedly ding your credit score, even if you haven’t used the card in months. By closing the account, you’ll lower the total amount of credit that’s available to you, which will negatively affect your credit utilization ratio — an important component to your score.
And if it’s your oldest card with a long history of on-time payments, the impact could be even worse, as this dings you in the “length of credit history” department. Lenders like to see long-running accounts with a positive payment history, but closed accounts with a history of on-time payments will eventually drop off your reports. Put the card in your sock drawer if you must, but don’t close the account; and consider adding a recurring payment to it to make sure the bank doesn’t close the account due to inactivity.