By now, you should have a clearer idea of what you need to do to develop and maintain good credit. What are some ways you can develop bad credit? Even when you may be following some rules of good credit development, if you fail in other aspects of credit management, you may not see increases in your credit score, or may lose future opportunities for better credit offerings.

As an example, you can mismanage your credit by having too many creditors (numerous credit and retail cards, financing for multiple high-ticket items like furniture, appliances, and vehicles, etc.). Even if you have a mix of credit accounts, having 5 or 6 accounts may be a sign of overextending. Having large balances due or high debt-to-value ratios on revolving credit accounts will diminish the credit you may be developing by making payments on time. Additionally, you may be making all of your payments on time, but if you have too many creditors, those may only be minimum or partial payments. Finally, if you are only making minimum or partial payments, your past due balances or interest on balances will increase, which could lead to default when they are too large for you to pay.

Overall, developing and maintaining good credit has to be approached holistically. Having strong payment history and long term relationships with creditors, low debt-to-value, minimal amounts of creditors that are both installment and revolving types of credit, and few inquiries can be easier to manage than overextending available credit, playing “catch-up” with payments, and appearing to be a credit risk for at least two years. It also adds up to a higher credit score, and better interest rates and terms on any new trade lines you do open.

Overall, nothing replaces good credit other than cash capital. If you don’t have the cash, then you will need the credit. With that in mind, making full payments to some creditors does not replace late payments on others, or having a good mix of credit accounts does not allow you to run your credit often.

Failure to manage credit all aspects of credit wisely, or not seeing the relationship between all the rules of the credit game may lead to severe mismanagement and excessive debt. These are symptoms of poor financial health, and may require more than simply reverting back the basic rules of credit development and management.

In order to understand what severe credit mismanagement or excessive debt may look like on a day-to-day level as well as how it can be transformed, it may be important to review “Signs of Credit Mismanagement” and “Effects of Bad Credit”.