8 Sneaky Things That Can Lower Your Credit Score
Did you know these everyday occurrences could actually be working against you?
Closing an old credit card account
While canceling a long-held but seldom-used account may seem responsible, it will shorten the length of your credit history, which can lower your score. If you feel like decluttering your wallet, nix a few of your more recently acquired cards, and hang on to the oldest one you've got—that long credit history will serve you well in the long run.
Financing that new bedroom set
If a local business offers to let you finance a purchase, think twice before accepting. The bank may consider it a “last resort” loan, which is a huge red flag for higher credit risk. Even with 0 percent financing deals, stores often open a credit card that they use to pay for that big purchase—but that card gets maxed out, affecting the “utilization” percentage that makes up 30 percent of your credit score, CBS News reports. Here are 11 tricks for improving your credit score.
Battling a bill
If you’re in the midst of a credit quarrel, most credit card companies will ignore the disputed credit line in your score calculation until it’s resolved, but sometimes they’ll include that charge, according to TheStreet. For instance, once a payment is 30 days late, most companies will count it as late, even if you have a dispute in the works. This will make it appear as though you are using a higher percentage of the total credit available to you, which can result in a lower-than-average number.
Getting a new phone contract
To decide if you’re financially trustworthy enough to follow through on a contract, cellphone providers typically launch what’s called a hard inquiry, each one of which lowers your score by a few points for up to two years. Anytime a company runs a credit check on you—if you apply for a loan or car insurance, for instance—a hard inquiry may follow. Also, check whether moving money from a big bank to a smaller credit union will trigger a hard inquiry. An individual inquiry won’t do much damage alone, but they can add up if you apply for too much at the same time. These are the 8 credit cards you should never open.
Not paying traffic tickets
Parking fines can really take their toll—especially in cities like Chicago, Washington, D.C., and New York, where unpaid parking tickets are sometimes turned over to various collection agencies. The result: a damaged score. To find out if your city (or one you’re visiting as an out-of-state driver) uses an agency, search on its .gov home page, or contact the department of revenue to verify.
Requesting a limit increase on your card
A higher limit means you use less of your limit every month, leading to a better score, but that initial inquiry can ding your score temporarily. The credit card company will initiate a hard credit inquiry and temporarily bring your score down a notch, credit.com explains. The boost you get from a better utilization rate could balance that out, so be confident the company will accept your request before asking for a higher limit. Here are 10 ways a good credit score can save you hundreds.
Never checking your credit report
Just like how regularly checking your credit card statements for inaccuracies is a good practice, looking over your credit report could improve your score, too. If any inaccurate information makes it onto your credit report, the mistake could take a toll on your score. Credit bureaus are legally required to investigate any dispute, myFICO.com reports, so reach out as soon as you notice a discrepancy. Your credit score will thank you.
Leaving a card unused
Closing a card can bring your score down because with a shorter line of credit, you end up using a higher percentage of the total each month. But stuffing that card in a drawer unused can hurt your score, too. If your bank notices you haven’t been using your card, TheBalance.com explains, it might shut down the account because of inactivity, leading to the same problem you were trying to avoid. Protect your credit score by using the card at least once every couple months—just don’t forget to pay the balance it in full every time. Next, check out the 11 best credit cards for every type of purchase.