5 ways you're sabotaging your credit repair efforts

If your credit is severely damaged because you filed for bankruptcy or for any other reason, you can still take steps to repair it. In order to do so, though, you need to make sure you don't hurt your credit even further. Avoid sabotaging your credit repair efforts by steering clear of these common pitfalls.

Failing to budget

You wouldn't travel without a map, and you shouldn't spend money without a game plan. Creating a budget allows you to identify spending and saving habits, areas that need improvement and progress over time.

Ignoring your credit reports

A 2013 Federal Trade Commission study revealed that 1 in 5 consumers had an error on at least one of their credit reports. These errors can seriously affect your credit score. Review free copies of your credit reports, and check your credit score regularly.

Maxing out your credit cards

Pushing your credit cards to the limit can affect your credit-utilization ratio, which is the amount you owe in relation to your credit limit. For a clean approach, aim to use 25 percent or less of your limit. For example, if your credit card has a $10,000 limit, maintain a balance of $2,500 or less.

While you might think closing an old and unused account is wise, the action could negatively affect your score by increasing your credit-utilization ratio. Breathe life into your score by keeping your accounts current and active.

Applying for too many accounts

Although new credit plays a vital role in an active score, applying for too many accounts can send the wrong message. Each credit application places a hard inquiry in your file. Too many hard inquiries can ding your score and imply risky behavior. Protect your score and reputation by practicing discretion.

Cosigning loans

Vouching for a friend's loan means placing the account on your credit reports and in some cases increasing your credit-utilization ratio. You're also stuck with the debt if your friend fails to pay. Achieving credit health is an individual process. Limit variability by delivering a polite and firm "no."