Congratulations on making it this far in your Credit Confidence Course! By now, you’ve learned how credit works, how your credit score is calculated, and even how to improve it.
But as important as building good credit is, protecting your score from damage is just as crucial. Even one small mistake can cost you points, money, or opportunities — sometimes without you realizing it.
In this lesson, we’ll cover the most common credit mistakes people make — often unintentionally — that can hurt their credit scores and financial future.
By understanding these pitfalls, you’ll be empowered to avoid them and keep your credit on solid ground for years to come.
⚠️ 1. Missing a Payment — Even Once
The most damaging mistake you can make is missing a payment on any of your credit accounts.
Why? Payment history accounts for 35% of your credit score — the largest factor by far.
Even a single missed payment can drop your score by anywhere from 60 to 100 points, especially if your history was previously clean.
What’s more, late payments don’t just vanish quickly. They can stay on your credit report for up to seven years, continuously weighing down your score and making it harder to qualify for loans or credit cards with favorable terms.
What counts as a late payment?
- Payments made 30 days or more past the due date usually get reported as late to credit bureaus.
- Payments made within a few days of the due date won’t harm your score — but many lenders charge late fees immediately, so it’s best to pay on time or early.
Real-Life Scenario:
Imagine you’re trying to qualify for a mortgage with a lender. They see a late payment from six months ago and consider you a higher risk. Your loan gets denied, or you get stuck with a higher interest rate that costs you thousands over the life of the loan.
✅ What to Do Instead:
Set up auto-pay: This is one of the easiest ways to never miss a payment. Most banks and lenders allow you to schedule automatic payments for the minimum amount or the full balance.
Use calendar reminders: If you prefer manual payments, set recurring alarms or phone alerts a few days before your due dates.
Act quickly if you miss a payment: Contact your lender immediately. Many will offer a “goodwill adjustment” if it’s your first time, removing the late payment from your report — but only if you call before they report it.
Tip: Even partial payments are better than none. If you can’t pay in full, pay what you can on or before the due date to reduce damage.
⚠️ 2. Closing Old Accounts
It’s tempting to close old credit cards to simplify your finances or avoid annual fees. But closing an account, especially your oldest one, can actually hurt your credit score in two ways:
- Credit utilization ratio increases: Closing an account reduces your total available credit, which means your credit utilization percentage goes up — even if your spending stays the same.
- Shorter credit history: Length of credit history accounts for 15% of your score. Closing old accounts shortens your average credit age, which can drop your score.
Example:
Say you have two credit cards with $5,000 limits each. You owe $2,000 total. Your utilization is 20% ($2,000 ÷ $10,000). If you close one card, your limit drops to $5,000 and your utilization doubles to 40%, which hurts your score.
✅ What to Do Instead:
Keep old cards open — even if you rarely use them.
Use them once every few months for small purchases, then pay off the balance in full to keep the issuer from closing the account for inactivity.
If the card has an annual fee, consider calling to ask for a no-fee version or see if it can be downgraded instead of closed.
⚠️ 3. Maxing Out Your Credit Cards
Even if you always pay your balance in full, maxing out your credit cards can damage your credit score.
Why? Because your credit utilization spikes when your balance hits 90% or 100% of your credit limit, signaling to lenders that you’re relying heavily on credit and could be financially stretched.
This high utilization will negatively impact the 30% of your score that’s based on credit usage.
✅ What to Do Instead:
Aim to keep your credit card balances below 30% of your limit, and ideally under 10% for the best scoring impact.
If you know you’re going to make a large purchase, try to pay it down before your statement closes, so a lower balance gets reported to the credit bureaus.
Also, consider spreading purchases across multiple cards to keep individual utilization rates low.
⚠️ 4. Applying for Too Many Cards or Loans at Once
Each time you apply for a new credit card, loan, or mortgage, the lender performs a hard inquiry on your credit report.
Hard inquiries typically reduce your score by a few points. But multiple inquiries within a short time frame can signal financial distress or risky behavior, causing a more significant drop.
In addition to inquiries, opening multiple new accounts lowers your average account age, which can also decrease your score.
✅ What to Do Instead:
Only apply for new credit when necessary.
Before applying, use prequalification or preapproval tools — these perform a soft inquiry that doesn’t affect your score — to gauge your chances.
If you’re shopping for the best loan rate (for mortgages, auto loans, etc.), try to submit applications within a 14- to 45-day window so the credit bureaus treat multiple inquiries as one.
Space out your applications by at least 3 to 6 months whenever possible.
⚠️ 5. Ignoring Your Credit Report
Many people don’t check their credit reports regularly — but errors and fraud are more common than you might think.
Mistakes like wrong balances, duplicate accounts, or unfamiliar debts can drag your score down. Worse, identity theft can go unnoticed for months or years if you’re not vigilant.
✅ What to Do Instead:
Check your credit reports from all three bureaus — Equifax, Experian, and TransUnion — at least once a year through AnnualCreditReport.com (which is free and official).
Even better, stagger your checks every 4 months, reviewing one bureau at a time to monitor your credit year-round for free.
Look for errors, unfamiliar accounts, or any suspicious activity. If you spot problems, dispute them promptly (see Lesson 2).
⚠️ 6. Co-signing for Someone Else
Co-signing a loan or credit card means you’re legally responsible for the debt if the primary borrower misses payments or defaults.
Even if the borrower is trustworthy, this action puts your credit on the line. Missed payments on co-signed accounts show up on your credit report and can damage your score just like your own accounts.
✅ What to Do Instead:
Think very carefully before co-signing.
Only agree if you trust the person completely and are financially prepared to take over payments if necessary.
Remember, co-signing can impact your ability to get new credit or loans because lenders consider co-signed debt part of your obligations.
⚠️ 7. Not Having Any Credit at All
Some people avoid credit altogether, thinking it’s safer. But without any credit history, you won’t have a credit score at all.
This makes it harder to qualify for apartments, loans, credit cards, and sometimes even insurance or jobs.
✅ What to Do Instead:
Start small and safely:
- Open a secured credit card, where your deposit acts as your credit limit.
- Take out a credit builder loan (see Lesson 4).
- Become an authorized user on a trusted family member’s or friend’s card.
✅ Freebie: “Credit Mistakes to Avoid” PDF Cheat Sheet
To keep these common pitfalls top of mind, here is a handy one-page PDF cheat sheet that summarizes the biggest credit mistakes and how to avoid them.
Stick it on your fridge, save it on your phone, or keep it in your planner for quick reference whenever you’re managing credit or money.
🧭 Recap:
| Mistake | How It Hurts | What to Do |
| Missing payments | Drops score dramatically | Auto-pay & reminders |
| Closing old cards | Shortens history & raises utilization | Keep open, use sparingly |
| Maxing out cards | Hurts utilization rate | Stay under 30%, ideally 10% |
| Too many applications | Lowers score, flags risk | Space them out, prequalify first |
| Ignoring reports | Errors hurt your score | Check regularly for free |
| Co-signing | Risk of their missed payments | Be cautious and selective |
| No credit use | No score generated | Start small with safe tools |