HOW TO MINIMIZE UNINTENTIONAL DAMAGE TO YOUR CREDIT SCORES

Losing points for voluntarily closing accounts is just one of the unexpected ways you can hurt your credit scores. You also can lose points for:

Opening credit accounts, both when you apply and for as long as a year afterward.
Transferring credit card balances.
Settling credit card debts. 
Using "limitless" cards.
Incurring library fines, parking tickets or other penalties seemingly unrelated to credit.

The key to increasing your score is continuing to pay down credit debt and holding off on opening any new accounts. Keeping your balances low, by the way, will be even more important as Fair Isaac rolls out the latest version of the score, FICO 08.

Opening New Credit Accounts

Just opening a credit card account to take advantage of the offer can ding your scores by 5 points or so. Transferring your balance to a credit card with a lower limit can hurt your scores, as can consolidating debt.

Transferring Credit Card Balances

Lower interest rates are generally better when you're trying to pay off credit card debt, but taking advantage of a balance-transfer offer can reduce your credit scores in a number of ways.

That's because the FICO model is heavily influenced by your "credit utilization ratio," the portion of your available credit limit you're actually using. The formula rewards a wide gap between your balances and your limits. Transferring a balance from a high-limit card to a lower-limit card makes it look like you're closer to maxing out that second card, and the scores can react negatively.

You can compound the damage to your scores by closing the card from which you transferred the balance. Closing the old account trims the amount of available credit that's used in the credit-scoring formula.

If you're planning to take advantage of a balance-transfer offer, read the fine print and consider the following:

Limit the number of credit card accounts you open. If you want to improve your credit scores, don't keep bouncing your balances from card to card.
Pay down your credit card debt. Use the lower rate as an opportunity to reduce your debt load.

Settling debts

For years, a glitch in the FICO formula often penalized people for paying old debts that had been charged off and sent to collection agencies. That glitch finally got fixed, but you can still do substantial damage to your scores if you settle a current credit card debt for less than you owe. If an account hasn't been charged off and you're dealing with the original creditor, Fair Isaac officials say, a settlement can be worse than leaving the account open and unpaid. Of course, leaving an account unpaid will eventually result in a charge-off and a referral to a collection agency, which isn't good for your scores, either. There's no easy solution if you haven't got the money to pay your bills. Filing bankruptcy is an option, although it's likely to have a far more devastating effect on your credit than a settled account or two.

Using “Limitless” Credit Cards

But sometimes issuers report an outdated or simply erroneous limit to the credit bureaus. You can check which number your lenders are using by viewing copies of your credit reports. By federal law, you can get one copy free annually from each bureau; the only free site is AnnualCreditReport.com.

If your limits aren't being reported accurately, you have a few options:

Fight. If your credit card has a limit, ask your issuer to report it correctly, and follow up with a dispute to the credit bureaus if it fails to act.

Reset. If your lender reports the highest balance charged instead of an actual limit, you can reset the number reported to the bureaus by running up a big balance one month, making sure you can pay this hefty number off in full when the bill comes to avoid unnecessary finance charges. (Don't do this when you're in the market for a loan, since you could sustain some short-term damage to your credit scores).

Switch. Use cards that properly report your limits to the credit bureaus.

Library fines and parking tickets

Local governments increasingly turn to private collection agencies to pressure consumers into paying the fines, often reporting the unpaid amounts to the credit bureaus as part of their efforts. Collectors may add late fees or other charges that increase the balance.

The bottom line:

Pay your fines promptly. Don't wait for follow-up notices because they can easily go astray.
Don't let a dispute fall through the cracks. Note the applicable deadlines on your calendar and make sure the issue has been resolved.
Don't move away from a problem. If you plan to move and believe you may have unpaid fines, contact the relevant municipality or library and make sure you've squared your account with them.
 

Contributing Source: Liz Pulliam Weston, MSN Money

There are many ways to unintentionally chip away at your credit score, including letting errors and inaccuracies linger on your report. Click on the link to see how CreditLawGroup can help you clean up your credit report and increase your credit score.