Protecting Your Privacy: We will never call or email you asking for money (see Consumer Alerts). There is no fee to apply. Close

3 Easy Ways To Destroy Your Credit

One of the worst financial situations you can find yourself in is one that includes a low credit score. When you have a low credit score, you might not be approved for the loans you need. If you are approved, it's likely that you will pay more in interest. A low credit score can even mean a higher security deposit when you rent an apartment, or higher insurance premiums.

Here are 3 reasons your credit score is low -- and what you can do to fix the problem:

1. You Pay Your Bills Late

pay-bills-late

According to credit scoring giant FICO, the most important factor in your credit score is your payment history. Your credit score is meant to be a representation of your past credit habits. If you pay your bills late right now, and if it's been a pattern in the past, that's an indication that you will likely pay late in the future.

The best thing you can do is start making all of your payments on time. Even non-credit bills, like utility payments, can be reported as delinquent if you regularly pay late or skip months. Set up a schedule, and make sure that all of your bills are taken care of as soon as possible. After a few months, your credit score will start to improve.

>>> Here are five ways to destroy your credit, and what to do about them.

2. You Have a High Amount of Debt

max-those-cards

The next most important factor is the amount of your available credit that you are using. If you are close to the max on your credit cards, it's going to impact your credit score and bring it down. The reason? Consumers that are close to using all of their available credit are considered at risk of running out of liquidity and at risk of possibility skipping payments in the future.

If you want to improve your credit score, pay down some of your debt. Try to get your credit utilization below 50%. It's even better if your credit card balance amounts to no more than 30% of your available credit.

3. Your Credit History is Rather Thin

long-credit-history

The longer your credit history, the better off you are. Your credit history length not only looks at how long ago you opened your first line of credit, but it also looks at the average "age" of your credit. So if you have opened a lot of new credit in recent months, that lowers the average age. It can also harm your credit score if you close a credit card you've had for years.

Try to focus on maintaining a longer credit history. Avoid closing your oldest credit cards. Instead, make a couple of purchases on them each month, and pay them off as quickly as possible. Also, avoid applying for new lines of credit one after another. Wait a few months between credit applications.

The following articles provide useful tips and information so you can make the most out of your credit.