Purse Strings Approved Professional

Blog Series

Are You Committing Credit Sabatage?

Our credit history follows us everywhere, painting a picture of our spending habits from yesterday and today. From it comes our credit score, a unique rating based on five components—payment history, loan balances, length of credit, credit inquiries and credit mix. We know the better our score, the better our chances at getting a loan approved with a great interest rate.

Would you be shocked to learn that you may be causing your credit score to drop? Before you find out the hard way, check out the five ways you may be sabotaging your credit score and what you can do about it.


The more times you’ve applied for credit, the more credit inquiries will be on your credit report. Any number over six is excessive and will have a negative impact on your credit score. Not only that, too many credit inquiries are a red flag to a lender. AVOID SABOTAGE: Credit inquiries make up 10% of your credit score, so use caution when applying for loans or store credit cards. Each loan application results in a credit inquiry which can drag your score down.





Lenders rely on your credit report to calculate your debt-to-income (DTI) ratio. The DTI compares your monthly income to your monthly debt payments. Every open account on your credit report is factored into the DTI calculation, even accounts without a balance. The more credit you have, the higher your DTI could be. If your DTI is TOO high, your loan application may be declined. AVOID SABOTAGE: Limit the number of open credit card accounts you have. If you have an excessive number of store cards, consider closing the accounts. (Be careful! You could lower your score if you close too many cards at once.)



Lenders want to see a healthy mix of installment loans and revolving credit (like credit cards or lines of credit) on your credit report. If you have too many of one or the other, it may cause your score to decline. Lenders want to know that you can manage a variety of types of credit, which is why credit mix is important and accounts for 10% of your credit score. AVOID SABOTAGE: Request a copy of your free annual credit report and verify what types of accounts you have. Do not open credit accounts just for the sake of improving your credit mix, though. The extra debt could hurt your score (and financial position) eventually.



When was the last time you reviewed your credit report? If there is incorrect information or if you have been the victim of identity theft, chances are your credit score is taking a hit. The longer these mistakes go on, the more your credit will suffer. AVOID SABOTAGE: Visit the Consumer Finance Protection Bureau for detailed instructions on how to set fraud alerts or dispute errors on your credit report.




CREDIT SABOTAGE #5: YOU’RE A CO-SIGNER. You may be tempted to help a friend or family member by co-signing on a loan. If you do, understand the consequences. If there is a default on the loan, the lender will turn to you for loan repayment. Your debt-to-income ratio may be impacted, too. Know the risks before signing on the dotted line. AVOID SABOTAGE: Ask the tough questions before you become a co-signer. Find out why the lender is seeking a co-signer. Most often, the applicant has little or no credit history, so they are a greater credit risk. Do not sign until you have given the request serious consideration, and know that you have the right to say “No.”

Not sure where to start? Take the first step in preventing credit sabotage and preserving your credit score by grabbing a copy of your credit report today! Visit www.annualcreditreport.com to request your free copy from all three credit reporting agencies: TransUnion, Equifax, and Experian.

Sara Hobbs

Sara Hobbs

Personal CFO & Cash Flow Coach at Stewardship Advisory Services, LLC

My specialty is making personal money management simple and stress-free! As your Personal CFO & Bookkeeper, you can hand off the heavy lifting of managing your personal finances to me. No need to spend your downtime combing through a spreadsheet when you can outsource your personal banking and budgeting basics to a finance professional.

 Want more resources like this delivered to our inbox?

Join our newsletter!