Five Things That Impact Your Credit Score

Your credit score can affect several areas of your life, from whether you get that apartment or house you’re applying for, to whether a potential employer decides to hire you or not. Since this important three digit number can affect such vital areas of life as where you work and live, it is important to keep it in good standing. There are things you can do to both help and hurt your credit score, and if you don’t know what those things are, you might be in for a surprise the next time you apply for a job or a home loan.


Your credit score is also the most important factor in determining the interest rate you qualify for when applying for a loan, as well as your credit worthiness. Therefore, the better (higher) your credit score, the less interest you will pay on loans. Having a good credit score can mean keeping thousands of dollars in your pocket over the life of a large loan. Here are some financial missteps you will want to avoid at all costs when it comes to things that impact your credit score.

1.  Late or missed payments. Missing payments or paying late can negatively impact your credit score. Making credit card payments on time every month shows financial responsibility and dependability, and is a key way to help improve your score.

2.  Only one kind of credit. Having multiple forms of credit can help improve your credit score, as well. Revolving credit like credit cards are one type of credit account. Loan payments are known as installments, and this type of monthly payment is seen as a different type of credit account. These accounts would be personal loans, home loans, or payments on large purchases such as a car, boat, or furniture that you are paying off over time.

3.  Having a high debt to credit ratio. Are your credit card balances high? The closer your account balances are to the limit of your available credit for those accounts, the worse it looks for your overall credit profile. You want to strike a good balance between using your credit cards on a regular basis, but not maxing them out. Creditors don’t want to think you have to use your credit cards to afford expenses of everyday living. It is best to keep your balances to less than 50% of the available credit line, and pay the balance off if possible. Having more than one card with a low balance ($300-$500) could allow you to pay the balances down to zero every few months.

4.  Closing credit cards with balances. You may think that closing a revolving credit card to get it off your credit record will be a good thing for your credit score, but that is usually not true. If you have a large remaining balance, closing that account will take a toll on your credit score. Since a portion of your score is determined by the overall amount of credit extended to you, removing this card from the equation also lowers the amount of credit granted to you, and this can damage your score.

5.  Unemployment. It happens sometimes, and it’s unfortunate. It may be unavoidable, and when you lose your job, it can be tough to keep things going. Thankfully, there are unemployment benefits to help get through the leaner times. Just remember that if you receive unemployment benefits, it will affect your credit score slightly. If at all possible, try to receive these benefits for only a short period of time. Credit bureaus do not know that you are on unemployment, but they do recognize the reduction in your income. This may change your ability to pay what is due in a timely manner, which will damage your credit score.


Avoid making these credit mistakes, and avoid years of potential money troubles. Your financial reputation is something that follows you wherever you go, and you want it to be healthy. A bad credit score caused by ignoring best practices and not taking your financial responsibilities seriously can negatively impact your quality of life, but it doesn’t have to. To repair or improve your credit score, remember to make your payments on time, keep your balances to fifty percent of available credit for each account, don’t close credit card accounts with big remaining balances, try not to receive unemployment benefits longer than absolutely necessary, and do your best to acquire more than one type of credit.