9 Things That Can Hurt Your Credit Score



a person’s credit score displays on their mobile phone

Yes, you can get a loan with less-than-stellar credit. In fact, Wise Loan works with customers and provides them with tools to pay those loans back responsibly and have a positive impact on their credit.

Because good credit is important. Here are just a few benefits of having good credit:

  • You may get approved for loans and other credit opportunities you wouldn’t otherwise get approved for.
  • It can lead to lower interest rates, which reduces the cost of your debt overall.
  • It might help you score better deals or get approved for car insurance and other services.
  • It can help you get approved as a renter.
  • Some employers run background checks that include credit checks when considering you for a job.

You can discover some ways to increase your credit score on the Wise Loan blog. But before you do that, make sure you understand all the factors that can have a negative impact on your score. Knowing these factors can help you avoid or address them, and that can help you improve your score in the future. Here’s a look at nine things that can hurt your credit score.

1. Making Loan Payments Late

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Timely payments are an important factor in your credit score. According to Experian, which is one of the credit reporting bureaus, payment history accounts for around 35% of your credit score. 

When you make a loan payment late, the lender may report it to one or all of the credit bureaus. How late you are and how often you pay late drive how much of an impact late payments have on your score. For example, one payment of 30 days late over a few years has much less of an impact than three or four late payments of 60 or 90 days or more would.

2. Not Making Required Credit Card Payments

a credit card sits on top of a bill

The same is true with credit cards. If you make a payment after the due date on your statement, you could run the risk of a late payment dinging your credit report. To get credit for paying on time, you have to pay at least the minimum amount due by the statement due date. Say the minimum amount due is $50 and you only pay $25 — the credit card company could consider you as paying late or missing the payment and report it accordingly.

3. Defaulting on Payments to Service Providers

a tipped over piggy bank with money coming out of it

Not all lenders report to the credit bureaus every month, and service providers such as utility, insurance or internet companies don’t typically report payments as a matter of course. However, if you default with these providers — which means you simply don’t pay your bill at all and are sent to collections — the collections account is likely to show up on your credit report.

Any type of report item that indicates you failed to pay your bills is a negative influence on your credit score. That includes defaults, collection accounts, foreclosures and bankruptcies.  

4. Maxing Out Your Credit Cards

a stack of maxed out credit cards

Credit utilization is a factor in your credit score. Experian estimates that it accounts for around 30% of your total score.

Your utilization rate is how much of your credit limit you’re using right now. For example, if you have one credit card with a limit of $1,000 and a balance of $500, you’re using 50% of your credit limit. That’s your utilization rate.

If that rate gets too high, it can impact your credit score. The Consumer Financial Protection Bureau recommends keeping a utilization ratio of 30% or less.

5. Too Many Credit Applications in a Short Amount of Time

a person fills out too many credit applications in a short amount of time

If you’re constantly applying for credit, it can make you look like you’re desperate for funds. That doesn’t necessarily speak well for your financial situation, making it a concern for lenders. Because of this, the credit scoring models account for hard inquiries in calculating your score.

A hard inquiry occurs when someone pulls your credit for the purpose of evaluating you for a loan or other funding. Each hard inquiry can bring your score down just a tiny bit. Rack up too many inquiries and you can drag your score down enough for it to make a difference. 

Generally, it’s best to limit how many credit applications you complete. Do your research and only apply when you’re reasonably sure you can get approved and you actually need the account or loan in question. 

6. Being a Cosigner for Someone Who Doesn’t Pay Their Bill

a stack of unpaid bills

When you cosign for someone, you agree to be responsible for the debt if they don’t pay as agreed. In many cases, lenders report payment history and account data to the credit files of both the signer and the cosigner. That means if the signer doesn’t pay, those missed or late payments show up on your credit file too. That’s bad for your score, so make sure you only cosign for people you trust. It’s also a good idea to have an accountability system in place so you can ensure they’re making timely payments. 

7. Not Having Enough Credit Types

a person looks at their credit card as they type on their laptop

Experian estimates that the account mix on your credit history accounts for around 10% of your credit score. If you only have one type of account, this lack of diversity might hurt your score. 

Lenders want to see that you can manage both revolving and installment accounts well. If you’re dealing with this issue, consider applying for the type of account you don’t already have.

8. Not Having a Long Enough Credit History

a credit report features a stack of credit cards, a pen, and a watch on top to show a person not having a long enough credit history

How long you’ve had a credit history and the age of each of your accounts is also a factor in your score. Many people know that if they’re new to building credit their score won’t be high. In fact, they may not have a score at all yet!

But did you know that closing an old account could negatively hurt your credit? If you close an account, it eventually ages off your credit report. That can lower the average age of your credit, which can lower your credit score temporarily. 

9. Being an Authorized User on an Account Someone Is Managing Poorly

a person looks at bills in frustration after being an authorized user on an account someone is managing poorly

Some people get added as an authorized user on the credit card account of someone they know. This is often a bid to improve credit. Many credit card companies report payment activity to the credit reports of the account owner and any authorized users.

However, if the owner of the account doesn’t make timely payments, maxes out their credit limits, or otherwise manages the account poorly, that can hurt your credit. Only enter into this type of agreement with someone you trust to manage credit well.

If you’re looking for a loan but don’t have stellar credit or you want to work with a lender committed to helping you improve your credit, learn more about applying for a Wise Loan loan today.

The recommendations contained in this article are designed for informational purposes only.  Essential Lending DBA Wise Loan does not guarantee the accuracy of the information provided in this article; is not responsible for any errors, omissions, or misrepresentations; and is not responsible for the consequences of any decisions or actions taken as a result of the information provided above.