11 Actions That Can Lower Your Credit Score

Quick Answer

Actions that can lower your credit score include late or missed payments, high credit utilization, too many applications for credit and more.

Worried young woman checking credit score on laptop at home

Experian, TransUnion and Equifax now offer all U.S. consumers free weekly credit reports through AnnualCreditReport.com.

Good credit can make it easier to qualify for credit cards and loans, but like staying physically fit, keeping your credit in shape requires diligence. Here are 11 actions that can lower your credit score and how to avoid them.

1. Making Late Payments

Lenders typically report your accounts to one or more of the three major credit bureaus (Experian, TransUnion and Equifax). Once a payment is 30 days past due, the creditor reports it as a late payment, and it stays on your credit report for seven years.

Because payment history is the biggest factor in your credit score, even one late payment can have a big impact. Some 35% of your FICO® Score (used by 90% of top lenders) is based on payment history.

When you discover you've forgotten to pay a bill, go online or call the lender to pay it. Paying before a billing cycle ends may avert a late payment on your credit report. Then set up reminders or autopay to keep paying on time.

2. Using Too Much Credit

Your credit utilization ratio reflects how much of your available revolving credit you're using. Lenders examine the ratio across all your accounts and the ratio for each individual account. To calculate credit utilization, divide your outstanding revolving credit balance by your credit limit and multiply by 100 to get a percentage. A $4,000 balance on a card with a $10,000 has a utilization ratio of 40%, for example.

Using over 30% of your available credit can do extra damage to your credit score; keeping credit utilization under 10% can positively impact it. Because credit utilization accounts for 30% of your FICO® Score, excessive utilization has a significant impact. Aim to keep your credit card balances under 30% of your limits and ideally below 10%.

3. Applying for Too Many Credit Accounts

Whenever you apply for credit, the lender checks your credit report; this is called a hard inquiry. Hard inquiries remain on your credit report for two years, though they typically affect your score for just a few months. A single hard inquiry usually decreases your score by five points or less, but too many hard inquiries for different types of credit at once have a bigger impact. Hard inquiries and new credit accounts together make up 10% of your FICO® Score. Applying for too much credit at once suggests you're financially overextended and more risky to lenders.

Shop around without hurting your credit by getting prequalified. Prequalification uses a soft inquiry (which doesn't affect your credit scores) to check if you're likely to qualify for credit. If you need to do a full application to get the specifics of your loan, keep them within a 14- to 45-day time frame whenever possible. Credit scoring models generally treat multiple hard inquiries for the same type of credit in a short time as one inquiry, limiting the impact to your credit score.

4. Closing Credit Accounts

Closing a credit card can cause your credit score to drop for several reasons.

First, it reduces your available credit, possibly increasing your credit utilization ratio. Closing accounts can also eventually shorten your credit history, which is based on the average age of all your credit accounts as well as your newest and oldest account, and makes up 15% of your FICO® Score. Finally, credit mix—having both revolving and installment credit—accounts for 10% of your FICO® Score. If you don't have any other revolving accounts, closing a credit card could reduce your credit mix and credit score. Unless there's an annual fee, it may be wise to keep the account open or, if there is an annual fee, talk to your card issuer about switching to a card without an annual fee.

5. Having Your Credit Limit Lowered

Recurring late or missed payments, excessive credit utilization or not using a credit card for a long time could prompt your credit card company to lower your credit limit.

This may hurt your credit score by increasing your credit utilization. Paying credit card bills on time and keeping credit utilization below 30% can keep your credit limits stable and boost your credit score.

6. Defaulting on a Loan

Defaulting on a loan has a major negative impact on your credit. After 90 days without making a debt payment, lenders typically consider you in default. A loan default stays on your credit report for seven years. Lenders may also take your collateral by repossessing your car or foreclosing on your home. A foreclosure is especially derogatory to your credit; only bankruptcy is worse.

To avoid defaulting, contact your lender to ask about changing your payment schedule or request a deferral, forbearance or loan modification. You can also try refinancing your loan to a more affordable payment. Consider credit counseling for advice on budgeting and repaying debts.

7. Cosigning on a Loan That Becomes Delinquent

Late or missed payments on a loan you cosigned for could appear on your credit report, damaging your credit. If the borrower stops paying altogether, you become responsible for the full amount.

Before cosigning a loan, carefully consider the borrower's reliability and investigate any state laws that protect cosigners. After cosigning, checking your credit report regularly can alert you of late payments you may need to bring current.

8. Accounts in Collections

Debts seriously past due (typically 90 days late) may be sent to collections. The creditor's collection department or an outside collection agency attempts to collect the money you owe.

By the time a debt goes to collections, late payments have already hurt your credit. A collection account on your credit report multiplies the damage. Collection accounts stay on your credit history for up to seven years after the debt became delinquent.

If you're having trouble making payments, contact your creditor immediately to discuss options. A reputable credit counseling agency can help you develop a debt repayment plan.

9. Debt Settlement

Debt settlement companies negotiate with your creditors to settle your debt for less than you owe. Typically, you pay the debt settlement company instead of your creditors; they hold that money in an account and then use it to settle with your creditors for a reduced amount. Sometimes presented as an alternative to bankruptcy, debt settlement can be almost as damaging to your credit due to all the missed payments on your credit report. Even after paying the reduced debt, not repaying the full amount is noted on your credit report and makes you a poor credit risk.

Consider a debt management plan with a nonprofit credit counseling agency instead. Credit counselors help negotiate payments so you can repay your entire debt, minimizing harm to your credit score.

10. Bankruptcy

Filing for bankruptcy to gain relief from debt should be a last resort. No other action causes more damage to your credit. Depending on whether you file Chapter 13 or Chapter 7, the bankruptcy remains on your credit report for seven to 10 years. Bankruptcy may also mean giving up your belongings to pay creditors.

To avoid bankruptcy, consider bringing in extra income through a side gig or extra work hours, implementing a drastic debt repayment strategy or getting credit counseling to help you pay off debt.

11. Inaccuracies on Your Credit Report

Incorrect information on your credit report could simply be a lender reporting inaccurate data, but could also signal fraud. The extent of the damage to your credit score varies.

To verify your credit report is accurate, get a free copy from the three major credit bureaus at AnnualCreditReport.com. (Checking your own credit won't affect your credit score.) You have the right to file a dispute with the credit bureau if you believe information is inaccurate.

The Bottom Line

The same good habits that help you maintain a good credit score can help you improve a poor score. Bringing late accounts up to date, paying bills on time and minimizing credit utilization show lenders you can manage your money—and theirs—responsibly.

How Good Is Your Credit Score?

300 credit score301 credit score302 credit score303 credit score304 credit score305 credit score306 credit score307 credit score308 credit score309 credit score310 credit score311 credit score312 credit score313 credit score314 credit score315 credit score316 credit score317 credit score318 credit score319 credit score320 credit score321 credit score322 credit score323 credit score324 credit score325 credit score326 credit score327 credit score328 credit score329 credit score330 credit score331 credit score332 credit score333 credit score334 credit score335 credit score336 credit score337 credit score338 credit score339 credit score340 credit score341 credit score342 credit score343 credit score344 credit score345 credit score346 credit score347 credit score348 credit score349 credit score350 credit score351 credit score352 credit score353 credit score354 credit score355 credit score356 credit score357 credit score358 credit score359 credit score360 credit score361 credit score362 credit score363 credit score364 credit score365 credit score366 credit score367 credit score368 credit score369 credit score370 credit score371 credit score372 credit score373 credit score374 credit score375 credit score376 credit score377 credit score378 credit score379 credit score380 credit score381 credit score382 credit score383 credit score384 credit score385 credit score386 credit score387 credit score388 credit score389 credit score390 credit score391 credit score392 credit score393 credit score394 credit score395 credit score396 credit score397 credit score398 credit score399 credit score400 credit score401 credit score402 credit score403 credit score404 credit score405 credit score406 credit score407 credit score408 credit score409 credit score410 credit score411 credit score412 credit score413 credit score414 credit score415 credit score416 credit score417 credit score418 credit score419 credit score420 credit score421 credit score422 credit score423 credit score424 credit score425 credit score426 credit score427 credit score428 credit score429 credit score430 credit score431 credit score432 credit score433 credit score434 credit score435 credit score436 credit score437 credit score438 credit score439 credit score440 credit score441 credit score442 credit score443 credit score444 credit score445 credit score446 credit score447 credit score448 credit score449 credit score450 credit score451 credit score452 credit score453 credit score454 credit score455 credit score456 credit score457 credit score458 credit score459 credit score460 credit score461 credit score462 credit score463 credit score464 credit score465 credit score466 credit score467 credit score468 credit score469 credit score470 credit score471 credit score472 credit score473 credit score474 credit score475 credit score476 credit score477 credit score478 credit score479 credit score480 credit score481 credit score482 credit score483 credit score484 credit score485 credit score486 credit score487 credit score488 credit score489 credit score490 credit score491 credit score492 credit score493 credit score494 credit score495 credit score496 credit score497 credit score498 credit score499 credit score500 credit score501 credit score502 credit score503 credit score504 credit score505 credit score506 credit score507 credit score508 credit score509 credit score510 credit score511 credit score512 credit score513 credit score514 credit score515 credit score516 credit score517 credit score518 credit score519 credit score520 credit score521 credit score522 credit score523 credit score524 credit score525 credit score526 credit score527 credit score528 credit score529 credit score530 credit score531 credit score532 credit score533 credit score534 credit score535 credit score536 credit score537 credit score538 credit score539 credit score540 credit score541 credit score542 credit score543 credit score544 credit score545 credit score546 credit score547 credit score548 credit score549 credit score550 credit score551 credit score552 credit score553 credit score554 credit score555 credit score556 credit score557 credit score558 credit score559 credit score560 credit score561 credit score562 credit score563 credit score564 credit score565 credit score566 credit score567 credit score568 credit score569 credit score570 credit score571 credit score572 credit score573 credit score574 credit score575 credit score576 credit score577 credit score578 credit score579 credit score