These 3 Moves Could Sabotage Your Efforts to Build Credit

Don't make these mistakes if you're working on improving your credit score. 

One of the trickiest parts about earning a good credit score is that you usually must convince a lender to give you a chance to borrow in order to show you can do so responsibly. That first lender has to take a chance on you -- despite the fact you don't already have a solid credit history.

Still, it's possible to get approved for loans and credit cards even if your score isn't perfect. And once you do, you can start building the type of record that earns you a favorable score and opens all sorts of financial doors. You'll need to avoid making mistakes in the process, though. 

In particular, here are three errors you could end up making that sabotage your efforts to improve your credit score through responsible borrowing behavior. You'll want to avoid them all. 

1. Maxing out your credit cards

Charging too much on your credit cards is one of the biggest mistakes you could make if you're working on trying to earn a good credit score. That's because credit utilization ratio is a big factor in the scoring system -- and it refers to the amount of credit used relative to what's available to you. 

To avoid hurting your credit, you don't want to use more than 30% of your credit lines, at most -- otherwise, lenders tend to think you aren't being responsible with debt. Ideally, using even less is best. That's why it's so important not to max out your credit cards. If you charge close to, or above, the credit limit, your credit score will go way down. 

2. Making a late payment

On-time payments are even more important when it comes to building credit. It's easy to make a mistake and miss one, but sadly if you are 30 or more days late and your tardiness is reported to the credit bureaus, it could do serious damage to your credit score.

You'll want to be sure to avoid this huge error, so set yourself a calendar reminder or consider signing up for automatic payments to make certain you are never late with sending in a payment to your creditors. 

3. Opening too many accounts at once

It's a good thing to have a mix of different kinds of credit accounts. You want to have several different types of debt on your record to get the best possible score. But you don't want to jump too quickly into applying for a lot of credit at one time.

Each time you open a new credit account, the lender will check your credit and an "inquiry" will go on your report for two years. Too many inquiries results in a lower score. And each new account also lowers the age of your credit history, which is a factor in your score as well. A longer history results in a higher score. 

So, you should be slow and steady when it comes to opening accounts to avoid hurting your efforts to improve your score. If you open new accounts gradually over time, don't use too much of the credit extended to you, and never miss a payment, you should be well on your way to building a credit history that makes your financial life a whole lot easier in the long run.