If you have bad credit, you may be relieved to know that you’re not alone.
According to Experian, about a third of Americans have poor or bad credit. The good news is, the number of people who have declared bankruptcy has been consistently falling since it peaked in 2010.
The economic crisis was a harsh blow for credit scores, and many Americans are still recovering. You’ve decided to join the ranks of diligent credit builders, and you’re on your way to one day being a proud member of the 800 Club. The great thing about credit scores is that you can always, always bounce back from a decrease with enough time and effort.
But did you know about all of the mistakes you can make while trying to build your credit? Here are the 12 worst ways to build credit.
- Closing your old accounts.
Many people with bad credit assume that closing up all the accounts they paid late on or had trouble with will help them improve their score. In fact, it can easily have the opposite effect.
Cancelling credit cards can actually have a negative impact on your credit score. One of the most important factors in your credit score is the average age of your credit accounts. If you close a credit card you’ve had for a while, especially if it’s your oldest card, you will see your score decrease. Instead of closing accounts on which you were delinquent, focus on getting those late payments removed from your credit report.
If you no longer want to use a card, just cut it up instead of closing it.
- Applying for credit cards you aren’t ready for.
Getting a new credit card, such as a secured credit card designed for re-building credit, can be a brilliant way to build your credit score.
However, if your credit isn’t all that great, it’s very important that you don’t apply for major credit cards that are hard to get. You’ll simply get denied, and the inquiry that the credit card company did on your credit report will lower your score temporarily.
Do your research and make sure you’re applying for cards that approve people with credit scores like yours. If your score is low, retail store credit cards are easier to get. If your credit is below 500, you may want to consider starting with a secured credit card.
If you do get denied for a credit card, wait until you receive the denial letter in the mail to apply for a new one. This letter will let you know why you were denied, and you can take that into account when deciding what steps to take next.
- Opening too many credit cards at once.
While opening a new credit card can be a good way to build your credit score, do it wisely. Opening up too many credit cards at once can decrease your score.