what habit lowers your credit score everfi

2 min read 27-02-2025

what habit lowers your credit score everfi

Meta Description: Discover the single biggest habit that can tank your credit score, explained simply. Learn how late payments, high credit utilization, and other factors impact your financial health. Improve your credit score today with practical tips and insights. (158 characters)

Credit scores are crucial for securing loans, renting apartments, and even getting some jobs. Understanding what impacts your score is key to financial well-being. While many factors contribute, one habit consistently drags scores down: missing loan payments.

The #1 Credit Score Killer: Late Payments

Failing to make payments on time is the most significant factor affecting your credit score. Every missed payment is a negative mark on your credit report. This includes credit cards, loans, mortgages, and even utility bills that are sent to collections.

How Late Payments Hurt You

Negative Reporting: Late payments are reported to credit bureaus (Equifax, Experian, and TransUnion).
Increased Interest Rates: Lenders see late payments as a risk. They'll charge higher interest rates to compensate.
Collection Agencies: Repeated late payments can lead to accounts being sent to collections, severely damaging your credit.
Denied Applications: A poor credit history from late payments can lead to loan and credit card applications being denied.

Other Habits That Harm Your Credit Score

While late payments are the worst offender, several other habits can negatively impact your credit:

1. High Credit Utilization

This refers to the percentage of available credit you're using. Keeping your utilization below 30% is ideal. Using a large portion of your available credit signals risk to lenders.

2. Applying for Too Much Credit

Each credit application creates a "hard inquiry" on your credit report. Too many inquiries in a short period suggest you're desperate for credit, lowering your score.

3. Opening and Closing Accounts Frequently

Constantly opening and closing accounts can negatively impact your credit history's length, a factor in your credit score. Stability is valued.

4. Ignoring Errors on Your Credit Report

Review your credit report regularly. Dispute any inaccuracies promptly. Uncorrected errors can harm your score unnecessarily.

5. Not Having Enough Credit History

A thin credit file can also hurt your score. It shows lenders a lack of borrowing history, making it difficult to assess risk.

How to Improve Your Credit Score

Building good credit takes time and discipline, but it's achievable. Here's what you can do:

Pay Bills on Time: This is the single most impactful step. Set up automatic payments to avoid missing deadlines.
Keep Credit Utilization Low: Strive to keep your credit card balances below 30% of your credit limit.
Limit Credit Applications: Apply for credit only when necessary.
Maintain Long-Standing Accounts: Avoid opening and closing accounts frequently. Long-term accounts demonstrate responsible credit management.
Monitor Your Credit Report: Regularly check your credit reports for errors. Dispute any inaccuracies immediately.
Consider a Secured Credit Card: If you have limited credit history, a secured card can help you build credit responsibly.

Conclusion

While several factors contribute to a good credit score, consistently making on-time payments is paramount. Avoiding the habit of late payments is the single most effective step you can take towards improving and maintaining a healthy credit score. Remember to check your credit report regularly and address any issues promptly. Taking control of your credit habits now sets you up for a secure financial future.