Kill Your Credit in Three Easy Steps

As lenders and creditors get stingier, your credit score is more important
than ever. And yet I talk to people all the time who have no idea how certain
activities affect their credit. Here, three quick ways to crater your score if
you’re not paying attention:

Pay late. In your world, maybe paying a bill on the 15th when it was
due on the 14th isn’t a huge deal. Unfortunately, creditors see it differently.
On-time payment history makes up 35% of your score—the largest chunk, so you can
clearly do a number on your credit by screwing around with this. If you have
trouble remembering to pay your bills, set up payment alerts that will ping you
when your payment’s due, or even set up automatic bill pay. Citibank, for
instance, will automatically pull the minimum payment due on my credit card from
my bank account on my due date. Easy.

Cancel old cards. Maybe you got caught up in a spring cleaning frenzy.
Maybe you’re decluttering. In any event, you’ve decided to cancel that old
plastic you got in college that you haven’t used in ten years. Big mistake. Some
15% of your score is based on the length of your credit history, so when you
kill your oldest credit card, you shorten your history—and lower your score.

Charge too much. Sure, it’s great that Amex gave you a card with a
$10,000 limit. That doesn’t mean you need to finance your latest home renovation
on it. About 30% of your credit score stems from your credit utilization—that
is, how much credit you’re using, compared to have much credit you have
available. Experts suggest using no more than 30% of your available credit—and
10% or less if you can swing it. (Hint: This is another reason not to cancel old
or high-limit cards: You’ll shrink your available credit, making your credit utilization higher by default.)

How many of these credit blunders have you made?