Surprise! These 3 Moves May Be Hurting Your Credit Score

The higher your credit score is, the easier and more affordable it becomes to borrow money when you need to. It's in your best interest to keep your credit score as high as possible.

Experian reports that the average FICO credit score was 715 in 2023. But whether your score is higher or lower than that, it's important to try to preserve it. These moves, however, might drag your score down without you being any the wiser.

1. Only making your minimum credit card payments

Your payment history carries more weight than any other factor when calculating your credit score. As such, you'd think that by making credit card payments on time, you'd be helping your score. But while making your minimum payments on your credit cards can help from a payment history perspective, letting the bulk of your balances linger and build could drive your credit utilization into unfavorable territory.

Your credit utilization ratio measures how much of your available revolving credit you're using at once. As that ratio rises, your credit score has the potential to dip. So you're better off trying to make payments on your credit cards beyond the minimum amounts required. Doing so could also limit the amount of interest you end up accumulating.

2. Paying off installment loans

There may come a point when you're done paying off your mortgage, or you're finally able to shed the car loan you've been paying for years. You'd think that paying off a large loan would, if anything, help your credit score. But unfortunately, the opposite might hold true.

When you pay off a long-standing loan, it reduces the average length of your open accounts. That could cause your score to take a hit. Plus, if you pay off an installment loan and are left with only credit cards as your open accounts, it could lead to a less favorable credit mix -- which is another reason your score might go down.

This isn't to say that you shouldn't pay off an installment loan as you're supposed to. Rather, the point is to be mindful of the impact it might have on your credit score so you're not thrown for a loop.

3. Applying for too many new credit cards in short order

Each time you apply for credit, a hard inquiry is done on your credit report. A single hard inquiry shouldn't cause much damage to your credit score, as it may only reduce it by a handful of points. It's when you apply for too many new credit cards in short order that more damage can occur, since in that case, you may be looking at multiple hits to your credit score in a row.

A better bet is to space out credit card applications by 90 to 180 days. That might also make it so you're better able to take advantage of the sign-up bonuses your new cards have to offer.

Great credit could do a lot of awesome things for your finances. Be mindful of the factors that could cause your credit score to take a dive unexpectedly and try to avoid them when possible. In some cases, such as paying off a loan, things may be out of your hands. But at least now you know what to expect.