Top 5 Factors Which Damage Your Credit Score

4th Apr 2025

Your credit score plays a big role in how financial companies assess your suitability when applying for loans, buying a home or car, or even opening a new credit card. Lenders and creditors look at your credit score and the detail in your credit file to help decide if you’re a good risk for credit or not. But it can be easy to damage your credit score without realising it. Here are five common ways your credit score could take a hit.

Late Payments

Your payment history is one of the most important factors in which goes to make up your credit score. Even a single late payment on a credit card or loan can lower your score, depending on the scoring model. These late payments can stay on your credit report for up to seven years, so it’s always best to pay on time, every time.

High Debt-to-Credit Utilisation Ratio

Your debt-to-credit ratio, which is the amount of credit you're using versus your total available credit, also affects your score. A high ratio (above 30%) can hurt your credit as it looks like you could be dependent on credit and are struggling financially. While opening new accounts to reduce this ratio might seem like a good idea, it could backfire. New accounts can lower the average age of your credit history and generate hard inquiries, which can further impact your score. It’s better to apply for credit only when necessary.

Multiple Credit Applications in a Short Period

When you apply for credit, lenders look at your credit report, and the fact that you have applied leaves a mark on your file. If you apply for several credit accounts in a short time, these hard inquiries can negatively affect your score and make you look like a higher-risk borrower. Always use eligibility checkers to avoid leaving a mark on your credit file.

Closing a Credit Card Account

It can be tempting to close a credit card once it's paid off, but doing so could hurt your credit score. Besides affecting your ratio that we discussed above, an account can also change the mix of credit types in your report, which lenders like to see. If you close an account which you have had for several years, it could shorten your credit history, which can lower your score.

Inactive Credit Accounts

If you stop using your credit accounts for a long period, it can hurt your score. If lenders don’t report new information to credit bureaus, it can make it harder for them to evaluate your creditworthiness as they have no recent information to base an opinion on. After some time, credit card issuers may mark your account as "inactive" and even close it. To avoid this, try using your credit cards every few months for small purchases, or set up recurring charges with automatic payments to keep the account active. It also goes without saying that you should also set up automatic payments to settle the bill when it becomes due.