5. Don’t close cards once they are paid off.
Why: Fifteen percent of your score is determined by the length of time you’ve had credit. By closing your oldest account, you
can shorten the length of your credit history, which can deal a blow to that part of the formula.
6. Don’t max out one card (say, a rewards card), then pay the full balance every month.
Why: You don’t get any points on your credit score for paying off the balance. In fact, credit bureaus don’t even consider it.
More important, maxing out one card, even if you never carry a balance or pay interest, raises your debt-to-credit-limit ratio
(bureaus consider individual cards’ ratios as well as your total ratio). For example, if you charge $4,000 of your $5,000
limit, you’re using 80 percent of your available credit. “Keep balances as low as possible,” McFadden advises. “Using less
than 30 percent of your credit limit is a good goal. The higher your balance climbs, the greater the damage to your score.”
7. Don’t open retail-card accounts.
Why: Twenty percent off a new pair of jeans isn’t worth the potential damage that opening a store card can do to your credit score.
First, five points are deducted for each new retail or gas card. Second, you’re lowering the average age of your credit history.
Third, these cards tend to have lower limits and higher interest rates―sometimes 20 percent or more. Finally, running up balances
on low-limit store cards affects your credit score more negatively than does using one or two bank cards, since bank cards’
higher credit limits increase your debt-to-credit-limit ratio.
8. Don’t pay off credit-card debt with a secured loan, such as a home-equity line of credit.
Why: Doing so may seem like a good idea, since the interest rate can be lower and you can consolidate your debts and make just one monthly payment instead of monitoring several cards. But by rolling credit-card balances into a home-equity loan, you are essentially converting unsecured debt into secured debt, says Ray. You’ll be putting your house up as collateral for the new television set or laptop that you charged. And if you can’t make your payments for any reason, debt collectors can seize your property.