Are you making these nine credit-building mistakes?

Written By John Egan

The credit-building landscape is full of landmines. Just one wrong move can hurt your mission to build your credit. To prevent a credit-building disaster, steer clear of these nine common credit mistakes.

1. Making Late Payments

Financial counselor Bonita Williams recommends having at least three accounts — credit cards, loans, utilities and so forth— that you pay on time every month. Don’t go more than 30 days past the due date before paying a bill, she says. Any payment that’s at least 30 days overdue usually will be reported to the three major credit bureaus: Equifax, Experian, and TransUnion.

“A lot of people may not realize the impact that simple, routine, on-time bill payments have on their credit score,” Williams says.

Williams works for Operation HOPE at a Regions Bank branch in the St. Louis area. Operation HOPE provides no-cost financial counseling.

Bethy Hardeman, chief consumer advocate at Credit Karma, says that being more than 30 days late on just one payment can hurt your score “significantly.” Late payments can linger on your credit report for seven to 10 years, she warns.

2. Gobbling up too much of your credit.

It can be tempting to max out your credit cards to pay for a trip to Mexico or buy a glitzy new dress. But that temptation can land you in big trouble.

Credit utilization — the amount of debt on your credit cards divided by your credit limits — represents one of the biggest chunks of your credit score, Hardeman says. Therefore, avoid using more than 30 percent of your available credit, she says.

“If you’re managing your credit wisely, don’t be afraid to accept an increase in your credit limit so you can lower your credit utilization,” Hardeman says. “Decreasing your credit utilization is often the easiest way to increase your credit score.”

3. Carrying a balance on your credit cards.

You don’t need to maintain a balance on a credit card to prove your creditworthiness, Hardeman says.

“Using your credit cards and paying the balances in full each month will show you’re using your credit responsibly,” Hardeman says. “In the end, carrying a balance from month to month will just cost you interest. You don’t need to pay interest to build credit.”

4. Abruptly Closing a Credit Account

Williams advises against closing a credit card account without giving a thought to how it’ll affect your credit score. Part of your credit score — in one case, it’s 15 percent — is based on the length of your credit history.

“If you have a shorter credit history, it may be best to leave your oldest credit card accounts open rather than closing them,” Williams says. “This provides a longer period that lenders or creditors can use to gauge your financial behavior, and that could make more credit available to you.”

If you close older accounts, you’re letting a big piece of your credit history slip away. However, you need to weigh that against whether those older accounts carry fees or interest rates that are too high, Williams says.

5. Failing to check your credit report.

Each year, you should check your credit report for errors and other problems. Your credit report could contain incorrect information that’s holding you back from obtaining credit cards or loans. Or you could have been victimized by identity theft and not even realize it.

Checking your credit report at least once a year also lets you see how well or how poorly you’re doing in building your credit, Williams says.

“It’s better to check your report each year than to find out during an emergency that there may be an issue with your credit,” Williams says.

You can obtain a free credit report once a year through the federally authorized Websites such as and also offer free credit reports if you sign up for a free account.

6. Concentrating on just one credit score.

No one has just one credit score. Credit card issuers, banks, and other lenders can choose from a pool of credit scores, according to Hardeman. Therefore, it’s practically impossible to figure out which score a certain lender will rely on, she says.

Don’t get too bummed out about that, though. If one of your credit scores is healthy, then all of them should be healthy, Hardeman says.

7. Worrying too much.

Matt Schulz, senior industry analyst at, says a lot of people tend to overthink their situations when they’re trying to build credit.

“The reality is that if you pay your bills on time, every time, and keep your debts down, your credit will be just fine,” Schulz says. “People need to remember that good credit is a marathon, not a sprint, and that if you simply keep paying your bills on time, every time, and keep your debts to a minimum, you’ll have a great credit score in time.”

8. Failing to set up auto pay.

It’s never been easier to schedule automatic payments for your monthly bills, Schulz says. Banks and credit card issuers, among others, provide auto pay through their websites.

“Just pick a set amount to pay each month and move on. The amount should be greater than the required minimum payment — the higher, the better,” Schulz says.

9. Being unrealistic.

If you’re trying to build or rebuild credit, you’re unlikely to qualify for a credit card that gives you a bunch of airline miles or a super-low interest rate. Instead, you’re going to need to settle for a secured credit card — backed by a cash deposit —or a higher-rate card.

Schulz says you should look at those less-sexy credit cards as stepping stones and remember “that if you pay your bills on time, every time, and keep those debts low, you’ll eventually graduate to a better card.”

Written on July 14, 2015

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