What hurts your credit score?

Curtis Arnold
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Curtis Arnold
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What hurts your credit score?

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Chances are that you probably know at least one or two things that can help build or rebuild your credit, such as using your credit card responsibly and making on-time payments; however, you might not be as familiar with what affects your credit score negatively. Minimizing the potential negative impact of these factors can help you avoid big drops in your credit score.

It is my hope that this article will help you avoid pitfalls involving your score and, at the same time, help you achieve a great score. The good news is that many credit score traps can be easily avoided. Moreover, knowing what to avoid can help you better understand things that can help obtain a good credit score.

For simplicity’s sake, I focus on the three main factors that can adversely affect your score. The Fair Isaac Corporation (FICO), the best-known company associated with consumer credit scores, breaks down how much each of these factors influences your score on a percentage basis. So, I’ll list these “big three” in order of importance.

1) Late payments

You more than likely know that late payments can negatively affect your credit. However, you may not realize that your payment history (with credit cards, auto loans, etc.) has the biggest impact on your score.

In fact, according to Beverly Harzog, a nationally recognized card expert and author of “The Debt Escape Plan,” payment history accounts for 35% of your FICO score. By way of explanation, there are several scoring models, but the FICO score is the gold standard since 90% of the most popular lenders use it when making credit decisions.

Harzog explains that “when you make a late payment, it damages your score.” The bottom line is that “paying all of your bills — not just credit card bills — on time is the foundation for a good score.”

Gerri Detweiler, credit and small business expert and co-author of “Finance Your Own Business: Get on the Financing Fast Track,” adds that “any kind of payment problem, including charge-offs or collection accounts, will hurt your score. The more recent they are, and the more frequently they have occurred, the greater the damage will likely be.”

How much late payments will affect your credit depends on all the information in your credit reports. If you have a long-established payment history, for example, one late payment will have less of an effect than if you are just starting to establish credit.

Due to a banking snafu, Detweiler, for example, received a 30-day late payment markup on her credit reports. While her scores dropped, it wasn’t as great as she had feared, and over time it was barely a blip.

One bright spot is that late payments are normally not reported by a lender to the three major credit bureaus unless you are 30 days late or more. Being late a day or two or even a couple of weeks likely won’t have a much of a negative impact on your score (though you will probably get dinged with a late fee).

2) Debt and a high credit utilization ratio

You probably are aware that carrying excessive debt is not a good thing and may assume that debt hurts your score. While debt (particularly high-interest rate debt) is certainly something you want to avoid if at all possible, debt does not necessarily destroy your credit.

Detweiler points out that “many people worry that too much debt will hurt their scores, but how you manage it is what’s most important here. In other words, a large mortgage or lots of student loans aren’t score killers in and of themselves.”

The main related “score killer” actually involves how much of your available credit you use at any given time. Harzog explains that every consumer has what in the industry is called a credit utilization ratio. While this may sound really technical, your utilization ratio is simply the amount of credit you are using compared to the amount you have available.

Detweiler notes that the ratio is also known as the “debt utilization ratio” and that it compares the balance (of your loan) listed on your credit reports to the credit line or limit that is reported to the three major credit bureaus. This ratio is the second most important component of your credit score and accounts for 30% of your score.

Without getting too technical, you should keep your ratio as low as possible. Harzog adds that “the golden rule is to keep your ratio under 30% so it doesn’t lower your score. But if you want to really boost your score, keep it under 10%.” For instance, if your credit limit on a given card is $10,000, you should carry less than a $1,000 balance if you want to stay under a 10% utilization ratio.


If you have credit card debt, consider taking advantage of a 0% balance transfer offer. This can really help you slash interest charges since there is little to no interest that is charged during the intro period.

I generally also advise consumers not to worry about credit utilization when making a balance transfer. Simply put, your priority should be on paying down your debt as soon as possible rather than on the temporary impact to your credit score as your score should naturally increase as you pay down debt.

3) A short credit history

The length of your credit history is important as it accounts for 15% of your overall score. As you might expect, the longer your credit history is, the better in terms of your score. If your credit history is only a year or two old or you have no credit, you may have what the industry refers to as a “thin credit file.”

Detweiler opines that “you’ll get credit, so to speak, for a longer, more well-established credit history. The scoring model will typically look at the age of your oldest credit reference and the average age of all accounts.”

Specially, your FICO score considers the following:

  • How long your accounts are, which includes the age of your oldest account, the age of your newest account and an average age of all your accounts
  • How long certain accounts have been open
  • How long it has been since you used certain accounts

As you can probably guess, having a long credit history of say 10-20 plus years can benefit your score greatly. This is one reason why establishing credit at an early age is important.


Although it may seem counterintuitive, Herzog suggests that you don’t close older card accounts that you’re not using. The account will stay on your credit report for up to 10 years, so your credit history isn’t an immediate issue, but credit utilization is.

When you cancel a card, she explains that you lose the available credit associated with it. This makes your credit utilization ratio go up, which in turn can lower your score. This only makes sense, however, if the card you’re no longer using doesn’t charge an annual fee.

Final thoughts

Having a good credit score can be financially empowering and a savvy way to improve your score is to better understand the main factors that are hurting your score.

The good news is that figuring out what hurts your score the most is fairly straightforward. While there are certainly other smaller factors that can affect your score, such as your mix of credit and credit inquiries, the “big three” factors listed above account for a whopping 80% of your score.

Understanding how these three main factors can hurt your score only requires a bit of probing. Detweiler explains, for example, that if you have an on-time payment history and your score is low, then it’s likely you have a “thin credit file” or that the utilization on at least one of the cards you carry is high.

The other piece of good news is that if you’ve suffered from bad credit or have no credit, you can rebuild or build your credit in a fairly short timeframe (think six to 18 months as opposed to six to 18 years!) using simple self-help techniques without paying a dime to a service that offers “credit repair.”

If you encounter problems with the self-help approach, Detweiler advises seeking outside help. Some nonprofit credit counseling agencies, for example, may be willing to meet with you for no charge and give you suggestions.

Curtis Arnold
CardRatings Founder

Curtis founded Cardratings.com in 1998 and, in so doing, helped pioneer the concept of rating credit cards. He has been a nationally recognized expert in consumer credit for well over 20 years. He is the author of “How You Can Profit from Credit Cards: Using...Read more

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