These Well-Intentioned Credit Moves Aren't Doing Us Any Favors


Remember when fat-free foods were all the rage—until we realized added sugar and sodium were doing the most damage? Or when we’d pull all-nighters before big project deadlines or exams, only to learn it’s sleep we need to sharpen our brains and make us effective?

It’s so easy to try to do the right thing, but inadvertently end up with bad results. That’s not just the case with diet and work habits, but credit, too. Take these four credit moves.

1. Applying for several accounts at once

No one wants to pay more interest than necessary, so it seems logical to apply for a few new cards and see which offers the best rate. Ironically, though, this can actually hurt our FICO scores. What??

“Any time your credit’s pulled, it counts as an ‘inquiry,’ which can have a slight negative effect on your score,” says Katie Bossler of credit counseling service GreenPath Financial Wellness. Not only can multiple “slight” dips add up, but when lenders see lots of new applications at one time, they start to worry we’re in a cash crunch and may not be able to pay back balances.

Fortunately, we can glean plenty of info about different cards without applying. Sites like Bankrate, CreditSesame and compare annual fees, interest rates, sign-up perks and other stats.

2. Revolving a balance in order to build credit

There’s a common belief that carrying a balance, and making on-time payments, helps establish credit. One problem: It’s not true. And it can cost us. While on-time payments are important—accounting for 35 percent of a FICO score—we don’t have to carry debt to get credit for on-time payments.

3. Opting for a lower credit limit

“Choosing a lower limit can be tempting if you want to avoid overspending, but it can backfire if normal credit card use causes a high utilization rate,” says Bruce McClary, vice president of communications for the National Foundation for Credit Counseling.

Credit utilization counts for 30 percent of our scores. Generally, we should keep the credit utilization ratio, or the amount we owe compared to our total credit limit, under 30 percent (though the lower the better).

So, asking for a lower limit can actually increase the ratio. On the flip side, one way to boost a score quickly is to ask for a credit limit increase we don’t actually plan to use.

4. Swearing off credit cards altogether

Sounds like a reasonable way to curb overspending. The only problem is that creditors sometimes close inactive accounts, which can hurt us since longevity makes up 15 percent of FICO scores.

A better idea, says Elaina Johannessen, program director at LSS Financial Counseling: Use a card for recurring payments, like a Netflix subscription or water bill. That way we’re maintaining activity without carrying the card in our wallet. (We just have to remember to pay it off.)

acorns+cnbcacorns cnbc

Join Acorns


About Us

Learn More

Follow Us

All investments involve risk, including loss of principal. The contents presented herein are provided for general investment education and informational purposes only and do not constitute an offer to sell or a solicitation to buy any specific securities or engage in any particular investment strategy. Acorns is not engaged in rendering any tax, legal, or accounting advice. Please consult with a qualified professional for this type of advice.

Any references to past performance, regarding financial markets or otherwise, do not indicate or guarantee future results. Forward-looking statements, including without limitations investment outcomes and projections, are hypothetical and educational in nature. The results of any hypothetical projections can and may differ from actual investment results had the strategies been deployed in actual securities accounts. It is not possible to invest directly in an index.

Advisory services offered by Acorns Advisers, LLC (“Acorns Advisers”), an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). Brokerage and custody services are provided to clients of Acorns Advisers by Acorns Securities, LLC (“Acorns Securities”), a broker-dealer registered with the SEC and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Acorns Pay, LLC (“Acorns Pay”) manages Acorns’s demand deposit and other banking products in partnership with Lincoln Savings Bank, a bank chartered under the laws of Iowa and member FDIC. Acorns Advisers, Acorns Securities, and Acorns Pay are subsidiaries of Acorns Grow Incorporated (collectively “Acorns”). “Acorns,” the Acorns logo and “Invest the Change” are registered trademarks of Acorns Grow Incorporated. Copyright © 2019 Acorns and/or its affiliates.

NBCUniversal and Comcast Ventures are investors in Acorns Grow Incorporated.