We all know that there are many benefits to improving your credit score.
A high credit score increases your chances for approval on loans, credit cards, mortgages, etc. Lenders will assess your creditworthiness and risk. These factors will directly impact the interest rates and lending terms.
Essentially they want to determine your ability to pay off the loan in time. However, there are some facts that you need to be aware of that might be affecting your credit score negatively.
In this article, we are going to uncover 5 of the most common actions that may actually be hurting your credit score.
1. Renting a Car With a Debit Card
While many rental agencies require that you pay your deposit with a credit card, some will accept your debit card instead. However, agencies typically have a clause in the contract stating that they can pull your credit report if you choose to pay with a debit card. That credit check causes a hard inquiry, which can ding your score a few points.
A hard inquiry is when a lender, credit card issuer or other financial institution requests a credit check in order to decide whether or not to extend a line of credit to you, such as a credit card or home loan. Each hard inquiry usually drops your credit score by a few points and will remain on your credit report for two years. The other kind of inquiry, soft inquiries, are made by people who don’t intend to take action, such as your landlord checking your credit, and won’t have any effect on your credit score. via: 10 Really Surprising Things That Can Hurt Your Credit Score
2. Canceling Your Gym Membership Improperly
Gym memberships are tricky as many of them offer only automatic withdrawal from a bank account or a monthly charge on a credit card. While this makes it extremely easy for you it also can pose challenges when trying to cancel your membership.
Gyms often have cancellation procedures that you are supposed to follow, usually involving paperwork. If you don’t fill out the paperwork to cancel, but contact the credit card or the bank to stop allowing the automatic payments, you could find yourself in trouble.
Your gym might report it as non-payment to the credit bureaus. Additionally, your account could be turned over to collections. Even if you don’t have an automatic payment arrangement, some gyms might take these actions if you don’t fill out the appropriate cancellation paperwork.
Therefore, when you sign your gym membership agreement, make sure you understand what actions you need to take in order to cancel your gym membership — and find out what the gym will do if you don’t follow proper procedure. via: 10 Surprising Ways to Negatively Affect Your Credit Score
3. Buying a New Cell Phone
Who would ever have thought that buying a cell phone could have an impact on your credit score?
Miranda Marquit, of Wisebread, says, “Increasingly, cell phone providers are checking your credit when you sign up for a contract. In some cases, the company performs a soft inquiry, and your score isn’t damaged. Other times, though, the provider runs a hard credit check. It looks as though you are applying for credit — even though you don’t think that you are.”
Even though it will not drastically affect your score, you should still be careful if you are having several of these done in a short span of time. Ask the provider what type of query they run. In many cases they may not know, but they should. At the very least they could give a call to their head office to find out. After all, it can be just a small change to your credit score that can drop you down into a different category. So be careful.
4. Unpaid Traffic Tickets
You may not think that there are huge repercussions from having unpaid parking tickets, but think again. Several cities are now sending those unpaid tickets straight to collections. And having anything in collections will severely decrease your credit score.
“Something going to collections is one of the worst things that can happen and will have one of the largest impacts on a person’s FICO score,” said Anthony Sprauve, senior consumer credit specialist at FICO.
So the next time you think about speeding or parking in a no parking zone you may want to think again. Or if you do just make sure you pay your tickets before the due date.
5. Not Alerting Creditors if You’ve Moved or Changed Names
Quite often creditors are the last ones that you think about if you’ve just moved or got married.
If you move between apartments frequently and don’t change your address on bills, you run the risk of not receiving bills on time and suffering late payments as a result. Not notifying creditors of a name change could result in your credit report not accurately reflecting the credit you’ve worked to build. via: 7 Common Mistakes That Can Lower Your Credit Score
The ‘Ask Experian‘ team advises that, “Because both men and women have the option to change their last name when they marry, credit reporting systems allow for multiple last names on one individual’s credit report…When someone changes their last name, it is automatically added to their credit report after they notify their creditors of the new name. When the creditor updates their records, they report the new name to Experian…Applying for new credit using the new last name will also result in the name being added to the report. The old name will likely remain a part of your credit report even after the new name becomes a part of the credit history. This helps ensure that the credit report is accurate and complete.”
The Bottom Line
Even when you aren’t borrowing money, your financial actions can impact your credit score. Missing a utility payment or skipping out on a library fine might seem like no big deal, but if you don’t take care of it, and let it sit, the end result can be a lower credit score. via: 10 Surprising Ways to Negatively Affect Your Credit Score
Make sure to review your credit report from time to time, even when you are not borrowing money. And don’t forget to monitor your credit score as well.
Also, stay informed. Legislation is changing all of the time and it is up to you to know the factors that affect your credit.