If you tend to bump up against your limit each month, you should consider requesting a credit limit increase. This will help your credit score in the long run. As always, try your best to pay off your balances in full each month.
4. You close unused credit cards.
Because credit utilization is such an important factor in your credit score, closing an unused credit card isn’t always the best idea. This will decrease the amount of credit you have access to and increase your credit utilization rate, unless you maintain a $0 balance across all cards.
Another important factor in your credit score is your length of credit history, which is 15% of your credit score. The longer your accounts have been open, the better, and closing older accounts can hurt this portion of your credit score.
That being said, if the unused credit card is newer and you can request a credit limit increase with other credit cards to keep your utilization low, it probably won’t hurt you to close the card. If the card charges an annual fee and you aren’t using it, it’s almost always worth closing it.
5. You don’t take advantage of credit card rewards.
What’s the point of a good credit score it you don’t use it? Aside from obvious perks like lower mortgage rates, one of the most fun advantages of having excellent credit is being able to access premium rewards credit cards.
When used wisely, rewards credit cards can help you save hundreds of dollars every year. Cash back credit cards can offer rates of up to 6% and are an easy way to save money.
Travel rewards credit cards can be a little more complicated to navigate, and a lot of people end up racking up points and miles they never use. However, if you can figure out how to maximize them for your spending habits and travel preferences, you can easily save more than $1,000 per year on travel.
6. You apply for too many credit cards at once.
While having only one credit card is a little too prudent, applying for several at once is also unwise. Recent activity accounts for 10% of your FICO score, and having lots of new credit inquiries can bring your score down significantly.
That being said, your credit score will start to bounce back up from credit inquiries after 3-6 months, and they’ll fall off your credit report after just two years. Having a couple recent inquiries is unlikely to damage your credit score in a noticeable way, and opening a new credit card isn’t necessarily bad. Try to space out credit inquiries and apply for only one card every 3-6 months.
7. You haven’t set up automatic payments.
Many people don’t set up automatic payments to their credit card. Often, they’re worried about overdrawing their account. However, overdrawing your account is less detrimental than missing a payment to your credit score.
Automating your payments is the most effective way to ensure that you never make a late payment, and it’s also the best way to create and stick to a budget.