What Are the Top 7 Factors That Hurt Your Credit Score in 2025

Understanding what hurts your credit score is key to managing your financial health. In 2025, credit scores remain a crucial part of how lenders, landlords, and even some employers evaluate your reliability. Many people wonder why their credit score drops unexpectedly or why it takes so long to recover after a setback. This article breaks down the top seven credit score killers, explaining why they matter and how you can avoid or fix these common mistakes.

Person reviewing credit mistakes on a laptop

Late or Missed Payments Have the Biggest Impact

Payment history is the single most important credit score factor in 2025. When you miss a payment or pay late, it signals to lenders that you might be a higher risk. Even one late payment reported to credit bureaus can cause a noticeable drop in your score.

Why does this hurt so much? Credit scoring models weigh recent payment behavior heavily. A payment 30 days late can stay on your credit report for up to seven years, although its impact lessens over time. The first 12 months after a late payment are the most damaging.

To minimize damage, always try to pay at least the minimum amount on time. If you miss a payment, catch up as soon as possible and contact your lender. Sometimes, they may offer a goodwill adjustment if you have a good history. Setting up automatic payments or reminders can help prevent future late payments.

High Credit Utilization and Why Balances Matter More Than People Think

Credit utilization refers to the percentage of your available credit that you are using. For example, if your credit card limit is $5,000 and your balance is $2,500, your utilization is 50%. High utilization signals to lenders that you may be overextended financially.

In 2025, keeping your credit utilization below 30% is generally recommended. However, lower is better. Even if you pay your balance in full each month, high reported balances at the time your credit is checked can temporarily lower your score.

This happens because credit bureaus often receive reports once a month, showing your balance at that moment. To keep utilization low, consider paying down balances before your statement closing date or making multiple payments throughout the month.

Collections and Charge-Offs Affect Credit for Years

When you fail to pay a debt for an extended period, creditors may send the account to collections or charge it off. Collections accounts are debts sold or assigned to a third party for collection. Charge-offs mean the creditor has written off the debt as a loss.

Both collections and charge-offs can stay on your credit report for up to seven years from the date of the original delinquency. They significantly lower your credit score because they show serious payment problems.

If you have collections, paying them off can stop further damage, but the record may still remain. Some newer credit scoring models ignore paid collections, but many lenders still consider them. Always review your credit reports regularly to spot collections early and work with creditors to resolve disputes or payment plans.

Accounts in Default or Repossession

Defaulting on a loan means you have failed to meet the terms of your credit agreement, often after several missed payments. Repossession occurs when a lender takes back property, like a car, due to nonpayment.

Both defaults and repossessions are serious negative marks on your credit report. They can stay for up to seven years and cause a steep drop in your credit score. These events show lenders that you were unable to fulfill your financial obligations.

To avoid default or repossession, communicate with your lender if you face financial hardship. Many lenders offer hardship programs or modified payment plans. If repossession happens, rebuilding your credit will take time, but consistent on-time payments on other accounts can help.

Frequent Hard Inquiries and Rapid Credit Applications

Every time you apply for new credit, lenders perform a hard inquiry on your credit report. Multiple hard inquiries in a short period can lower your credit score because they suggest you may be seeking a lot of new credit quickly, which can be risky.

In 2025, credit scoring models often group multiple inquiries for the same type of loan (like mortgages or auto loans) within a short window, usually 14 to 45 days, treating them as one inquiry. This allows consumers to shop around without excessive penalty.

Still, applying for many different types of credit rapidly can hurt your score. To minimize impact, space out credit applications and only apply when necessary.

Closing Old Accounts Can Hurt Credit History

Closing an old credit card or loan account might seem like a good idea, but it can actually lower your credit score. This happens because closing accounts reduces your overall available credit and shortens your average credit history length.

Credit history length is a key credit score factor. Older accounts show lenders you have a longer track record managing credit responsibly. When you close old accounts, especially those with a positive payment history, your average account age drops.

If you want to close an account, consider keeping your oldest cards open, even if you don’t use them often. Just make sure to monitor for any fees or fraud.

Errors or Inaccurate Reporting That Go Unnoticed

Mistakes on your credit report can hurt your credit score without you realizing it. These errors might include incorrect personal information, accounts that don’t belong to you, wrong balances, or outdated negative items.

In 2025, it remains essential to check your credit reports from the three major bureaus—Equifax, Experian, and TransUnion—at least once a year. You can get free reports from AnnualCreditReport.com.

If you find errors, dispute them promptly with the credit bureau. Correcting mistakes can improve your credit score and prevent future issues.