Unexpected Factors That Can Sabotage Your Credit Score

Closing Old Credit Card Accounts

Closing unused credit card accounts can negatively affect your credit score. It can impact your debt-to-credit utilization ratio, which accounts for 30% of your credit score.

By closing an old credit card, you reduce your overall available credit, making it harder to maintain a favorable utilization ratio and diminishing your credit history's average length, which mortgage lenders value highly.

Opening a New Credit Card

Applying for a new credit card can result in a minor reduction in your credit score (up to 5 points) due to a "hard inquiry" placed on your credit report.

For individuals near the threshold of having a good or excellent credit score, this small reduction could push them into a lower credit tier, directly affecting their ability to secure the best interest rates on a mortgage.

Not Using Your Credit Cards

While responsible credit card usage is essential, letting your cards remain unused for an extended period—typically six months—can lead to the account's closure by the issuer. This unexpected closure reduces your average credit history length, harming your score.

Failing to Pay Medical Bills

Unpaid medical debt may be outsourced to third-party collection agencies, which may report your delinquency to credit bureaus, significantly impacting your credit report and overall score.

Missing Payments on a Business Credit Card

Owners of businesses with credit cards for expenses should be aware that their business activities can directly influence their personal credit history.

Many business cards require a personal guarantee. Any default or late payment on a business credit card can be reported to personal credit bureaus, negatively affecting your score. Even applying for a business credit card can place a hard inquiry on your personal credit.