Be aware that Annual Credit Report.com is the only place where you can get a credit report for free with no strings attached. (Other sites may slip in monitoring services that will cost you a monthly fee unless you opt out.) When you get your report, make sure it is accurate, and that it’s about you and only you (for example, not about your son with the same name). If not, follow the instructions on how to fix it with the dispute form you’ll be offered on the site.
4. Taking it to the limit
Just like closing an account lowers your debt-to-available-credit ratio, running your credit cards close to the limits does as well. “The score looks at your accounts individually and as a whole,” says Paperno. Officially it’s called overutilization, and it means you’re using too much of your available credit. So running up even one card can hurt your total score.
If you’ve almost maxed out your cards, use them as little as possible for a while and pay them down. Once you do, keep your charges to 30 percent or less of your available credit, recommends Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling.
Which should you pay off first, the card with the highest interest rate or the card with highest balance?
That depends on what your goal is. If you want to get your credit score higher, then you should pay off the one with the highest balance, because that high balance is lowering your ratio of debt to available credit. But if you want to save money in the long run, paying off the one with the higher interest rate is probably better, even if it has less effect on your credit rating.
5. Using cash over credit
While that may be good for budgeting, it’s murder on your credit score. “Your credit rating is not solely a function of what you owe, it’s a measure of how well you handle debt,” says Scott Bilker, founder of DebtSmart.com. By using cash all the time, you’re not giving lenders any information to judge your creditworthiness. If you don’t want to pay interest on credit cards, just pay the bill in full every month.
6. Not shopping around for lower rates
Lenders don’t know the interest rate you’re paying, and if your finance charges are high, it’s harder for you to pay your bill. “This puts a lot of financial pressure on people, which can eventually cause them to be late or even default,” says Bilker. Spend some time looking at cards and rates at Creditcards.com and Bankrate.com.
7. Applying for extra cards
Getting a 10 percent discount on a purchase in exchange for opening a new credit account at the department store seems enticing, but every time you apply for a card, a “credit inquiry” is added to your report. Too many inquiries at one time make you look desperate for credit—not the signal you want to send to creditors, says Cunningham. One exception: When you’re rate-shopping for a mortgage, a car loan or a student loan, your FICO score usually reflects that by lumping those multiple inquiries together as one.
Leslie Pepper is a freelance writer based in Merrick, N.Y. Her work has appeared in Parade, Good Housekeeping, Woman’s Day and Harper’s Bazaar.