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Confessions of Credit Mistakes from the myFICO Forums

Getting credit "right" is tough. Should you apply for the credit card with big rewards without a sign-up bonus or vice versa? Should you have two credit cards or three? Should you close an account to increase your credit score, or will that have the opposite effect?

The questions about credit are endless, and so are the mistakes we can make. Although making mistakes is a great way to learn (most of the time), learning from the mistakes of others is even better. So read on, see what others have done wrong, and learn what NOT to do.

Credit Mistake #1

Trudy

Trudy wanted to get out of debt. She had a high credit utilization ratio (the amount of credit used vs. the amount of credit available) on every credit card except for one—a card she didn't even know was still open. It had a $100 credit limit, and she wanted to increase that limit so that her utilization ratio would decrease. When she called to initiate the increase, she didn't realize they'd be checking her credit. DING. Hard Inquiry! Her credit score decreased by 8 points.

Lesson learned: When dealing with credit changes or applying for new credit, find out first if the lender will be checking your credit.

Credit Mistake #2

Saeren

Saeren wanted more credit... a lot more credit. So he applied for all the cards he felt like applying for, and it cost him. Many card issuers have policies in place to deny credit when an applicant has opened a significant number of cards within a short period.

Lesson learned: Being approved for many credit cards may make you feel good, but it concerns lenders.

Credit Mistake #3

MrT_521

MrT had a convenience store card account he'd opened in 1998. This year it would've been 22 years old—a nice addition to his AAoA (average age of accounts), but MrT closed the account. Accounts that are closed but in good standing will stay on your credit report for up to ten years and could help improve your credit score. Unfortunately for MrT, in a few months, it will be ten years since the account closed, which means it will be removed from his credit report. His next oldest open account will be 11 years. Will having the 22-year-old account deleted from his record hurt his credit score? He'll find out in a few months when it's off his credit report.

Lesson learned: If you have a longtime credit line that's in good standing and can help your AAoA, think about keeping it open—even if you only use it once in a while. It may impact your score down the line.

We All Make Mistakes

If you've made mistakes with your credit, learn from it, don't kick yourself. We've all been there and will probably be there again. Check out some more mistakes made by myFICO Forum members. You may have made the same ones. If you haven't, take what they learned and run with it!

Rob Kaufman

Rob is a writer... of blogs, books and business. His financial investment experience combined with a long background in marketing credit protection services provides a source of information that helps fill the gaps on one's journey toward financial well-being. His goal is simple: The more people he can help, the better.