1. Paying your credit card late.

Your payment history has the most significant impact on your credit score. To be exact, it makes up 35% of your credit score. Timely payments help build a positive credit score. Late payments will bring your credit score down.

The more delinquent your credit card becomes, the more it hurts your credit score. A single 30-day late payment won’t hurt your credit score as much as a 90-day late payment. Late payments continue to affect your credit score for seven years, as long they’re included on your credit report. They hurt your credit score less over time as long as you add more positive payment history to your credit report. After seven years, they won’t hurt your credit score at all.

2. Letting your credit card get charged-off.

A credit card gets charged off after 180 days of delinquent payments. Charged-off credit cards are one of the most devastating things that can happen to your credit score. Charge-offs are more difficult to recover from than a single late payment.

3. Having a high or maxed out credit card balance.

Your level of credit card debt is another important factor for your credit score. It’s 30% of your score. Your level of debt compares your credit card balances to your credit limit. The higher your balances are, the more your credit score hurts.

As your credit card balances grow beyond 30% of your credit limit, your credit score will begin to drop. A maxed out credit card can cost hundreds of credit score points, especially if you have a high credit score to begin with.

The good news is that you can recover credit score points lost from a high or maxed out credit card balance by paying the credit card balance below 10% of your credit limit.

4. Applying for too many credit cards at once.

Each time you make an application for credit, an inquiry is placed on your credit report. Inquiries make up 10% of your credit score and can cost 70 to 80 points if you have a credit score in the 700s or 800s. The more credit cards you apply for, the more your credit score will hurt.

When you’re on the market for a new credit card, avoid applying for several credit cards at once. Instead, compare credit card offers and choose one credit card to apply for.

If you’re denied for a credit card, wait before applying for another one. The credit card issuer will send a letter telling you the reasons you were denied. You can use this as an opportunity to repair your credit and improve your chances at getting approved for your next credit card.

5. Opening a new credit card.

Your age of credit is 15% of your credit score. The credit scoring calculation uses the average age of all your credit card accounts. Anytime you open a new account, even a credit card, your average credit age will drop. Opening just one new credit card won’t devastate your credit score. However, the more new credit cards you open, the more your credit score will fall. So, open only one new credit card at a time.

6. Not having a credit card at all.

You can build your credit score without having a credit card, but you’ll be missing out on some credit score points. Ten percent of your credit score considers your mix of credit. That part of the credit score calculation is checking to see if you have experience with different types of credit – both credit cards and loans. Having a credit card and a loan can help you build a better credit score.

7. Closing a credit card

Closing a credit card is more likely to hurt your credit score than to help it. If you close a credit card with a balance, your credit score is going to drop because it looks like you’ve maxed out your credit card. That’s because credit issuers typically report a $0 credit limit on a closed credit card.

Even if the credit card has a $0 balance, closing it could still hurt your credit score depending on the balances on all your other credit cards. When the credit score calculation considers your level of debt, it looks at each credit card individually, then at your total credit cards and credit limits (credit utilization). When you close a credit card, it can drive up your total credit utilization and hurt your credit score.

It’s widely reported that closing an old credit card will hurt your credit score in terms of credit utilization, but that’s not true immediately. The credit bureau will continue to report an account closed in good standing for up to 10 years. It’s only after that point that the credit card will drop off your credit report and potentially hurt your credit score.

Related posts:

1. How to Improve a Bad Credit Score
2. How Credit Cards Impact Your Credit Score

Why do you want to close your credit card?

Far too many people close credit cards out of anger, like they’re trying to get back at the credit card issuer for one thing or another. It doesn’t work. Closing a credit card is always more likely to hurt you than your credit card company.

More sensible reasons for closing a credit card account are because you have too many credit cards to manage, your credit card issuer just increased your interest rate, or the credit card issuer just added a new credit card fee you can’t avoid.

Pay off the credit card balance.

Leaving a balance on a closed credit card will always hurt your credit score. That’s because 30% of your credit score is based on your level of debt, which compares your credit card balance to your credit score.

Closing a credit card with a balance raises your debt-to-credit ratio for that credit card to 100%, a move that could really hurt your credit score, especially since a credit utilization of 10% or less is ideal. Once your credit utilization rises past 30%, your credit score is severely impacted.

Once you’ve paid off your credit card, then it’s ok to close it. Avoid making new charges on the credit card, otherwise paying off the balance will be much harder.

Check your other credit cards.

Leave the credit card open if you don’t have any other credit cards. This will help boost your credit score since your mix of credit is 15% of your credit score. You need to have different types of credit accounts – both credit cards and loans – to get the best credit score.

You may need to leave this credit card open to balance out your overall credit utilization, the ratio of your total credit card balances to your total credit limits. If your other credit card balances are relatively high, losing available credit could drive up your credit utilization resulting in a blow to your credit score.

For example, let’s assume you have three credit cards (including the one you want to cancel) with total balances of $5,000 and total credit limit of $20,000. Your overall credit limit is 20%. If you close a credit card with a $10,000 credit limit and your total balances remain the same, your credit utilization will shoot up to 50% ($5,000/$10,000).

Closing a credit card account is about your total credit card portfolio, not just the one credit card you want to close.

When the coast is clear, make the call.

Once you’ve done the due diligence to make sure closing your credit card won’t hurt your credit score, call the number on the back of your credit card to let your card’s customer service know you want to close your account. Be prepared for them to try to convince you to keep your credit card open. They may even offer a lower interest rate or other incentive for keeping your credit card open. If you truly want to close your credit card, be firm and repeat that you’d like to close your credit card account.

Follow up in writing.

Even though you’ve let your card issuer know via telephone that you want to close your credit card, it’s a good idea to follow up in writing. A letter confirming that you requested your account to be closed will help clear up any possible future confusion about closing your credit card.

In your letter, make sure you include your name, address, and account number. It will also help to reference the date and time of your telephone call to close your account.

Sending your letter via certified mail or return receipt requested (or both) will help you prove the card issuer actually received your letter if the fact ever comes into question. Make sure you send the letter to the address specified for correspondence and not your regular payment mailing address.

Check your credit report.

Your credit report will confirm that your credit card account was closed as requested. It could take at least 30 days for your account to be closed and your credit report to be updated. The account should say “Closed” or “Closed at cardholder’s request.” It should not say “Closed at grantor’s request.” The listing itself won’t damage your credit score, but could be viewed negatively by businesses that check your credit report in the future.

If the account isn’t correct on your credit report, confirm with your ex-card issuer that the account was actually closed. You may not have given enough time for your credit report to be updated so wait and try again in another 30 days. If the account continues to be reported inaccurately, submit a credit report dispute and include a copy (not the original) of your letter as verification of your request to close the account.

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