Are You Unintentionally Damaging Your Credit Score?

Confusion surrounding credit can lead people to lower their scores by mistake.

Poor credit check box on glass

Neglecting to pay off credit card debt every month or opening too many retail reward cards can drag down your credit score.

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Given all the myths surrounding credit scores, from the (false) belief that married couples share a single score to the notion that each person only has one, it’s no wonder there’s also some confusion about just what can help or hurt a score. In fact, some people unintentionally lower their scores, which can lead to higher loan payments or even loan denials, through behaviors they could change. Here are six common mistakes that can accidentally hurt your credit score:

1. Avoiding credit altogether. While living a debt-free life sounds like a good idea, it can actually make it harder to take out a loan when you want to. That's because lenders look for experience with managing debt. They want to see that you can make consistent, on-time payments each month before deciding whether or not to issue you any credit.

2. Comparison shopping. While checking around for the best price is a savvy move in theory, in practice, it can ding your score. When you call different lenders to check on mortgage rates or auto loans and they issue you a quote, they first check your credit history with the credit bureaus. That can look like you're preparing to take on too much debt, which concerns lenders. While the impact isn't huge, it can hurt people with limited credit histories more, because they don't have much experience to balance out the negative impact from the credit checks.

[Read: Where to Look for Free Information About Your Credit.]

3. Closing accounts. After paying off a credit card debt, you might be tempted to shut down the account for closure. But that move can actually hurt your credit score, because lenders look for experience with long-held accounts. If you've had that credit card for a long time, consider hanging onto it even after you pay it off, because it reflects well on your ability to manage credit over time.

4. Lowering your credit limit. While you might want to lower your credit limit, especially if you share a card with someone you think might overspend, such as a spouse or college student, to prevent a card from racking up a huge bill, think again: Lowering your credit limit can hurt your credit score. That's because you appear more creditworthy if you are using only a small portion of your overall available credit.

[Read: How Seniors Can Improve Their Credit Rating.]

5. Opening a retail card account to snag a discount. It might sound logical to open up that department store card so you can get the 10 percent discount on your purchase – but doing so could hurt your credit score. When a lender checks your credit history, that inquiry knocks off points.  Also, opening new accounts can set off a red flag that you're taking on too much debt, which can send lenders running in the other direction.

6. Maintaining a small credit card balance from month-to-month. Making only a minimum payment on a credit card, or paying anything below the full amount due, leads to more debt along with interest and fees. But some people carry that debt anyway, because they erroneously think it shows they can manage and maintain their accounts. To lenders, though, it can just look like the borrower is getting in over his head, which could eventually trigger higher interest rates on the account. So pay off that monthly balance whenever possible and as soon as possible. You’ll also save yourself money on interest in the short term.

[See: 10 Surprising Facts About Modern Consumers.]

Given all these misconceptions, it's no wonder that credit reports can be extremely confusing. Financial experts recommend checking your credit report once a year, free of charge, at AnnualCreditReport.com, so you can ferret out any mistakes.

If you also want to commit to boosting your credit score, then focus on making regular payments each month. That’s the surest path to a stronger credit score, despite promises from score improvement companies that say they can quickly ramp up your score before a loan application. Instead, pay bills on time, and you won’t have to dread your next loan submission, whether it’s for a home, car or school tuition.