Seven Credit Score Pitfalls to Avoid

Explanation of Credit Scores

So, what is a credit score? Credit scores are numeric estimates of your likelihood to repay debt on time. A credit score distills years of borrowing behavior into a snapshot that can swing the cost of financing by thousands of dollars over a loan’s life. Although dozens of proprietary models exist, two systems dominate consumer lending:

• FICO Score: produced by Fair Isaac Corporation, ranges from 300 to 850.
• VantageScore: a joint model from the three major bureaus (Equifax, Experian, TransUnion), also ranges from 300-850.

Both scores evaluate five main factors and weight them as follows:

• Payment History (35%): The most important variable is whether you pay your bills on time.
• Credit Utilization (30%): Ratio of your credit balances to their limits.
• Length of Credit History (15%): The duration that your credit accounts have been active.
• New Credit (10%): The no of newly opened accounts and inquiries.
• Credit Mix (10%): The range of credit accounts you have (e.g., credit cards, auto loans, mortgages).

Generally, scores between 670-739 are Good, 740-799 are Very Good, and anything exceeding 800 is Exceptional (FICO, 2025). But what can you do with good credit? A good score delivers thousands in cost savings via lower rates. Other pros include higher borrowing limits, easier approval for loans and rental agreements, and better insurance premiums. Conversely, poor credit below 580 can cost you thousands in interest and limit your access to financial resources. So, what hurts your credit score? Let’s explore hazards that silently erode scores, explain what affects your credit score, and offer ways to avoid ruining it.

Late Payments

Even one payment that posts 30 days past due can hammer a well-built history. Advantage CCS highlights that a consumer with a 670 FICO could lose roughly 150 points after a single 30-day delinquency (Mangis, 2023). Worse, the stain lingers on your score for up to seven years. Lenders read late activity as an early warning that cash flow is tight, so they offset risk with higher APRs or outright denials. Late payments are one of the top determinants of what can lower your credit score and block future borrowing.

Maintaining a spotless payment trail is the fastest way to achieve healthy scores because it attacks the largest weighting in every model. To avoid credit score pitfalls:

• Set autopay for at least the minimum.
• Schedule calendar nudges a week before the statement date.
• If cash is short, call the creditor before the deadline. Many will grant a hardship extension if you have an otherwise clean record.

High Credit Utilization

Credit utilization measures how much of your revolving credit you tap. A $1,500 balance on a $5,000 limit equals 30% utilization. Banks once floated the “keep it under 30%” rule, but newer research suggests the lower, the better. Using much less than 30% of your credit typically gives better results. Utilization changes are recorded monthly, so a single large purchase left unpaid for a cycle can snapshot you as maxed-out.

So, what habit lowers your credit score when it comes to utilization? Keeping it in check by making multiple micro-payments throughout the month. Also, ask card issuers for limit increases after income jumps and spread recurring expenses across several low-balance cards. Lastly, paying before the statement closing date keeps reported balances slim, proving to algorithms that you don’t lean on plastic for everyday cash flow.

Applying for Too Much Credit

Each time you formally apply for new financing, the lender performs a hard inquiry. The Consumer Financial Protection Bureau (2012) reports that “each additional credit inquiry will take fewer than 5 points off a FICO score”. Five points may sound trivial, but several rapid-fire applications compound the effect and signal desperation.

Hard Inquiries vs. Soft Inquiries

• Hard Inquiry: This happens when a lender reviews your credit for lending purposes; it can lower your score.
• Soft Inquiry: Occurs when you or a company reviews your credit for informational purposes; it doesn’t affect your score.

What impacts your credit score are repetitive applications, where several underwriters pull your credit report because you applied for credit. Soft inquiries, such as checking your report, are informational only and harmless.

If you are shopping for credit, avoid actions that might harm your score. Cluster rate-shopping (e.g., auto loans) within a 14-day window, so scoring models treat the queries as a single event. Otherwise, space applications six months apart and always pre-qualify with soft-pull tools before committing to a full submission.

Closing Old Credit Accounts

Sometimes, well-intentioned decisions can backfire—such as closing a paid-off credit union credit card. While it might feel responsible, shutting down seasoned tradelines shortens average age and chops available credit. Both side effects raise utilization and shrink score depth. Before closing, weigh the account’s age, fee structure, and credit limit.

Alternatives to Closing Accounts

• The best strategy is to park a small subscription on the card (like Netflix) and automate payment, preserving tenure without annual fees.
• Use the card occasionally to keep it active.
• If an issuer will not waive fees, consider downgrading to a no-fee product instead of canceling.

Keeping dormant credit alive fuels score longevity, which is one of the key factors related to what affects your credit score.

Ignoring Errors on Your Credit Report

Mistakes abound in credit reporting. A recent investigation found that 44 percent of participants spotted at least one error after pulling their credit report file (Consumer Reports, 2024). Regarding mistakes, what hurts your credit score includes faulty late payments, misapplied limits, or even a stranger’s account on your record. Worse, unresolved errors may mask identity theft.

Under U.S. law, you can fetch free reports from each bureau annually at AnnualCreditReport.com; access has been weekly since the pandemic. Dispute inaccuracies by phone, online, or certified mail with supporting evidence, such as a credit report with highlighted errors and documents backing your assertions. Bureaus have thirty days to investigate and respond. Successful deletions can rebound scores overnight.

Co-signing for Others

Signing your name to a friend’s auto loan or a sibling’s apartment lease means the debt appears on your report from day one. If the primary borrower pays late, the ding lands on you, and high balances inflate your utilization. Even perfect payments can complicate your debt-to-income ratio, jeopardizing future mortgages.

Only co-sign when you can afford the payments, and the arrangement has a clear exit, such as a scheduled refinance. Otherwise, steer loved ones toward secured cards or credit-builder loans—tools that grow their score without risking yours. If you must co-sign, monitor the account closely and set up alerts. Think of it as your own loan—because, financially, it is.

Monitor Your Credit Score with Free Credit Monitoring Tools

What can lower your credit score over time? Avoid the pitfalls above and be proactive in monitoring. Scores shift constantly as lenders update balances, inquiries, and payoff milestones. Real-time alerts can flag fraud, unexpected utilization spikes, or a forgotten late fee before serious damage occurs. Also, free credit monitoring tools available through online banking send push notifications for any bureau change, helping you avoid common credit score pitfalls.

Benefits of Monitoring:

• Early fraud detection: You receive alerts when someone tries to open an account in your name.
• Real-time updates: Know immediately if your score drops or rises.
• Educational insights: Learn how actions like opening a new credit card impact your score.

Frequently Asked Questions

How often should I check my credit report?

Aim for at least three times a year, rotating among the bureaus every four months. If you’re actively learning how to build your credit score, monthly monitoring through a free tool like your bank's credit monitoring dashboard keeps you informed of incremental gains and new risks.

What is the best way to dispute errors on my credit report?

Gather documentation (statements, police reports, or payoff letters), lodge an online dispute with the concerned bureau, and send a certified letter for a paper trail. Bureaus must respond within 30 days and update their credit reports if the furnisher gave the wrong information. If the issue persists, escalate with the CFPB.

How can I improve my credit utilization ratio?

Use lower balances with bi-weekly payments, request higher limits, or diversify across multiple cards to dilute each individual utilization percentage.

What are the consequences of co-signing for someone else’s loan?

You share legal responsibility for the debt. Missed payments reduce your score, and high balances inflate your utilization, adding double-digit interest to your future loans.

Citations

Chris Horymski (2025, January 28). What Is the Average Credit Score in the US? Experian. https://www.experian.com/blogs/ask-experian/what-is-the-average-credit-score-in-the-u-s/

FICO (2025). What is a Credit Score? https://www.myfico.com/credit-education/credit-scores

Lauralynn Mangis (2023, March 16). How Many Points Does Your Credit Score Drop If You’re Late On A Payment? Advantage CCS. https://www.advantageccs.org/blog/how-many-points-does-your-credit-score-drop-if-youre-late-on-a-payment/

Consumer Financial Protection Bureau (September 2012). Analysis of Differences between Consumer- and Creditor-Purchased Credit Scores. https://files.consumerfinance.gov/f/201209_Analysis_Differences_Consumer_Credit.pdf

Consumer Reports (2024, April 30). Almost half of participants in Credit Checkup study find errors on credit reports; more than a quarter find serious mistakes. https://advocacy.consumerreports.org/press_release/almost-half-of-participants-in-credit-checkup-study-find-errors-on-credit-reports-more-than-a-quarter-find-serious-mistakes/