People today are very concerned about their credit scores. A good credit score can be the difference between receiving a loan, a credit card, a mortgage — it’s the deciding factor between financial success and ruin.
[Read: Ways to Fix Your Credit Score]
720 or higher is considered a good credit score, but every lender has a different standard. If you’ve been actively working to improve your credit score, you may want to take a look at these factors that could actually be sabotaging your credit score!
You Didn’t Pay that Ticket
Many municipalities, in order to encourage offenders to pay their fines on time, will turn the debt of a parking or traffic ticket over to a collections firm, who in turn report the debt “as a collection account to the credit report companies.”
You Didn’t Pay that Library Fine
Knowing what you now know about parking tickets, it shouldn’t come as a surprise that late fees from libraries can also impact your credit score – and yet it does! Nobody expects the sweet little old lady librarians from their local branch to enforce late fees by reporting to credit bureaus, but it’s becoming a commonplace tactic for underfunded libraries across the country.
You Applied for Too Many Credit Cards
According to myFico, “checking your credit report won’t affect your FICO Scores, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.” However, the same principle doesn’t apply to actually applying to new credit cards. When you apply, the lender looks into your credit score, and such inquires can sabotage your score for up to two years.
You Took Advantage of In-House Financing
In-house financing is “a type of seller financing in which a firm extends customers a loan, allowing them to purchase its goods or services.” Although this option is an easier route that cuts out the middleman in a large purchase, this type of lender tends to arbitrarily issue credit, and the poor reputation of the loaner can actually sabotage your score.
You Closed That Idle Account
Some people today have been caught up in the less-is-more mentality. While that may stand true for things like nicotine, it might actually sabotage your credit score. As it turns out, closing a credit card reduces “the average age of all of your accounts [so…] closing a credit card account and incurring more debt have the same negative impact on your credit score.” In this case, if you have to close an account, try to close one that opened most recently or that has an annual fee.
You Connected a New Service
Services such as home utilities, cable, and cell phones might look into your credit in order to determine whether or not they should demand a security deposit for your account. This can have an adverse affect on your credit, especially when you relocate and have to acquire multiple entirely new accounts all at once.
You Opened a New Account
Not all banks do this, but some companies will order a credit report when determining whether or not to do business with you. In this case, an inquiry “takes place when a company has a legitimate business reason to look into your credit report.”
You Rented a Car
The next time you rent a car, don’t use a debit card, which could end up backfiring on you. Many rental agencies “have policies that allow them to run credit checks on customers who use debit cards” in order to ensure that their customers are trustworthy and will follow through on payment.
You Didn’t Pay that Medical Bill
The current healthcare system in America is outrageously expensive. However, if you avoid payment on bills from doctors visits, hospital procedures, or any sort of treatment, that “medical debt goes to collections and shows up on your credit report, [and] it will hurt your credit score.”
You Skipped A Payment
Skipping a payment for a service, a loan, or a credit card can sabotage your credit. In fact, “payment history information typically accounts for nearly 35% of your credit score, making it one of the single most important factors in calculating your score.”
You Have a Tax Liability
Like a parking ticket and a library late fee, a tax liability will accrue interest and fees. After a certain point, “the IRS will automatically file a Notice of Federal Tax Lien, which will appear on your credit reports as a seriously negative item.”
You Abandoned a Membership
Make sure that when you cancel your Hulu account or your Gym membership you actually take the steps to properly terminate any sort of contract or agreement. If you don’t, the company could continue to demand payment, even if their service goes unused.