This post was created by OneMain Financial

Building good credit is one of the best steps you can take for your finances now and in the future. Poor credit can affect many different areas of your life, from being able to qualify for an auto loan to taking out a mortgage to renting an apartment. 

Sometimes in the chaos of daily life, it’s easy to pick up bad financial habits without realizing it. Let’s explore how those habits could impact your credit and what to do instead. 

Making late payments or missing payments 

Your payment history makes up 35% of your FICO® credit score, which is a number that reflects your creditworthiness or ability to pay back a loan. Not paying your credit card and other bills on time or at all could indicate to lenders that you might not be a reliable customer, you aren’t responsible with money or you don’t have the funds to pay back what you owe.   

The later your payment is, the worse it can be for your credit score, especially if your payment is more than 30, 60 or 90 days past due (depending on the terms of your agreement).

For most bills, your payment history is reported to the main credit agencies (Equifax, Experian and Transunion). Late or missed payments could stay on your credit report for up to seven years. They could also lead to substantial late fees and penalties.

If you’re leaning on credit cards to cover an emergency medical bill, a major home repair or another big life event, you could consider a personal loan. Typically available from a bank, credit union or online lender, a personal loan might be a way to borrow a certain amount of money at a lower interest rate and more favorable loan terms than a credit card. 

Before you sign a loan agreement, make sure you have a plan to pay back the money to avoid late or missed payments and to make sure you’re not stretching your budget more than you can bear. Do your research on lenders and requirements to find the best loan for your situation.

Using too much of your available credit 

Maxing out your credit card or carrying high balances across several credit cards could also negatively impact your credit score. Having a high credit utilization ratio, the amount of your available credit you’re using at a given time, is seen as risky because it means you’re accumulating a lot of debt that you might not be able to pay back on time or in full.

You credit utilization is 30% of your FICO credit score, and is the second largest factor in determining your overall rating.2 A rule of thumb is to keep your credit utilization below 30% for a better credit score.  

Applying for too many credit cards at once

There are a number of reasons why applying for multiple credit cards, especially one after another or at the same time, could hurt your credit. Each time you apply for a card, it triggers a “hard check” on your credit. Multiple hard checks in a short amount of time might indicate to a lender that you’re trying to borrow more money than you can repay. 

Instead, you could look into pre-qualifying for a new credit card. Pre-qualifying triggers a “soft check” on your credit and doesn’t affect your score. Pre-qualifying isn’t a full approval, but it will give you an idea of whether or not you are likely to be approved. 

Closing your credit card accounts 

Similarly to opening too many credit cards, closing your existing accounts could hurt your credit score. Closing an account can reduce your credit utilization ratio, since you won’t have as much credit available. It can also affect your credit mix (the types of accounts you have open) and the average age of your accounts — both smaller but meaningful components of your credit score.

Not checking your credit report

Just as you regularly check your bank accounts and credit card activity online, it’s important to check your credit report periodically. Your credit report shows a range of activity from how many credit cards you’ve opened and closed to your payment history to whether you are paying your bills on time. 

Checking your report could also help you spot fraudulent activity like identity theft, or even mistakes. 

Checking your credit report regularly can give you the opportunity to reflect on how your financial habits are moving the needle in the right direction. You can check your report for free once per week through the three major credit agencies at annualcreditreport.com.

Boost your credit with good financial habits

Even when life gets busy, it’s important to stay on top of your credit score and protect your credit. Make your payments on time, don’t use too much of your available credit, avoid applying for and closing credit cards without thinking it through and monitor your credit report.

Changing your habits isn’t always easy, especially where finances are concerned, but it’s worth it to ensure you are setting yourself up for a more secure and stable future. 

Notice: Information provided in this article is for information purposes only and does not necessarily reflect the views of worldcrunch.com or its employees. Please be sure to consult your financial advisor about your financial circumstances and options. This site may receive compensation from advertisers for links to third-party websites.

This content was produced independently from the Worldcrunch editorial team.