NEFE’s On Your Own will be retiring on Dec. 30, 2019.

For more resources and tools, visit

Avoid These 4 Credit Mistakes

(Don't Shade Your Credit)

Are you damaging your rep without even knowing it? Here are 4 ways you might be throwing shade at your credit score.


You’re in the checkout line and the cashier asks if you want to save 10% by applying for a store credit card. The discount-loving part of you is like, obviously, sign me up. But a store-branded card is still a credit card.

“Each time you apply for credit, an inquiry shows up on your credit report and pulls your score down a little,” says Will VanderToolen, director of counseling services at the AAA Fair Credit Foundation in Salt Lake City.

Be especially careful about opening too many credit cards if you’re about to apply for a big loan, such as a car loan or a mortgage.

“Don’t apply for credit that you don’t need,” says VanderToolen. “But also don’t avoid getting a card at a store you frequent if the benefits will yield positive results over time."


Credit can be a Catch-22: You don’t want to go into debt, but someday, you’ll need to get a loan. Even using your debit cards and managing your bank account responsibly does not help you build credit.

"Even if you run your debit card as credit, it will not report to your credit file," says VanderToolen.

If you’re nervous about credit cards, you might try a secured credit card. Car loans, business loans, personal loans and mortgage loans also work, however you need credit to get them (there’s that Catch-22 again), so you’ll likely require a co-signer.


Canceling cards — especially accounts you’ve had for a long time — lowers the average length of your account history. Lenders want to see a long history of using credit responsibly. If you close an old account, you’re erasing your credit past.

Also, closing accounts lowers your credit utilization ratio, which measures how much of your available credit you're using.

For example, if you have 4 cards with $10,000 of available credit, and you have $2,500 in balances, you're using 25% of your credit, which VanderToolen says is a safe ratio. But if you cancel 2 of the cards, lowering your available credit to $5,000, you're suddenly using 50 percent of your available credit, which makes you appear less stable.

Hipster man with mustache contemplates credit mistakes


\ Credit and Debt Basics Course


Credit limits are like a trick question. Lenders give you a certain amount, but they don’t want you to spend it all. When you get close to your limits, your credit utilization ratio increases, which lowers your credit score because you’re using more of your available credit.

And if you max out your cards, you’ll probably be less likely to pay off the balance.

Erin Bedillion, 31-year-old Gibsonia, Penn. mother of two, admits she was a sucker for discounts. Over time, she ended up with 6 new store brand cards and almost maxed them out.

“I'd say, ‘I’m sick of wearing the same clothes, I'm sick of wearing the same shoes, and not having enough food,' so I’d go out and charge $500," she says. “If I had done things differently, I could be a stay-at-home mom and enjoy my daughter instead of worrying every day about money."

Luckily, you’ve read this article and are one step closer to becoming a master of credit. Just remember to avoid these common credit mistakes so you don’t shade your credit score, or your future self.

As always, we’ve got your back. — The On Your Own Team End of article insignia

[Any reference to a specific company, commercial product, process or service does not constitute or imply an endorsement or recommendation by On Your Own, the National Endowment for Financial Education or any of its affiliate programs.]