4 Credit Card Mistakes That Could Hurt Your Credit Score

These errors could come back to haunt you.

Your credit score is important to every aspect of your financial life. A good score makes it easier to rent an apartment, borrow at an affordable rate, and qualify for utilities and cell phone service with a reasonable deposit.

Credit cards can help you build your credit score but they could also ruin your credit if you don't use them wisely. To make sure your card use doesn't damage your score, you'll want to be sure you avoid these four big credit card mistakes. 

1. Not making payments on time

If you miss a credit card payment, this can do a tremendous amount of damage to your credit score. Your payment history is the most important factor in the credit scoring formula and even one late payment can send it plummeting. 

Card issuers don't usually report a payment as late until you are 30 or more days behind. You can make sure this doesn't happen by keeping track of your payment schedule on a calendar, setting reminders, or setting up autopay. 

2. Maxing out your credit cards

While payment history is most important to your credit score, credit utilization comes in at a close second. Your credit utilization rate is calculated by dividing the amount of credit used versus the amount of credit extended to you. If you have charged $1,000 on your card and have a $4,000 limit you would divide $1,000 by $4,000 to find a utilization ratio of 0.25 or 25%. 

A lower utilization ratio is preferable and will earn you a better credit score. It's imperative to keep your credit use below 30% of available credit, as anything above this threshold is considered too high and damages your credit score. 

3. Opening too many cards at once

Other factors that impact your credit include the number of inquiries and the average age of all your credit accounts collectively. 

Inquiries are put onto your credit record after you apply for a new credit card or other kind of loan, and each inquiry stays on your credit report for a period of two years. Too many is a red flag that hurts your credit score because it suggests you can't control your borrowing. And the average age of credit, obviously, is determined based on how old all your accounts are.

If you open a new credit card, you get an inquiry and reduce your credit age. That's why you want to avoid opening too many cards at one time, as doing so can hurt your score in two ways. 

4. Closing old cards you no longer use

Finally, closing old cards is another big mistake to avoid. By closing down open accounts, you reduce the credit available to you. As you read above, this means your utilization rate goes higher since closing your old unused account won't reduce the amount of credit you've used.  Closing down the old account could also get rid of the positive payment history on the account and will lower your average account age. 

Fortunately, each of these mistakes is easy to avoid if you pay your bills on time, don't open too many accounts, don't close down old ones, and don't charge too much.