Here are 10 things most of us would not even think of when it comes to our credit score.
1. Never close your oldest credit card. Do not close credit cards at all if you carry large balances. Always keep at least two major credit cards open with the highest limits you can get, but avoid the temptation to spend. You can keep all major cards open and not harm your scores.
2. Frequent refinancing of home loans harms scores.
3. If you have ever used a finance company, try to get the account removed from your credit even if it was paid perfectly, unless it is your oldest account. This type of account lowers credit scores.
4. Too many in-store cards – It’s always a temptation at the checkout line, but signing up for a Home Depot, Macy’s or any in-store credit card just to get a 10 percent or 15 percent discount may work against your FICO score.
Even if you vow to promptly pay them off, opening up several of these accounts in succession could spell trouble for your score because opening multiple lines of credit in short period of time is considered abnormal behavior by credit agencies, according to Fair Isaac, and it suggests that you might be more of a credit risk.
5. Carrying a balance over 48% of the credit limit. Ideally you should pay off your card each month, but use no more than 25-35% of the allowed limit. Anything over 48% will hurt your score.
6. Applying for a car loan. Financing a car loan at the dealership might spark not just one, but a slew of inquiries into your file. Why? Some dealers shop multiple lenders to find the most competitive rate for customers. Hey, you’d do it, too, to find the best deal. (And you probably have approved several hits if you’ve shopped for a home loan, for instance, on a site that aggregates lenders and lets them compete for your business.) Even if you go through with just one loan, a comparison shopping trip can rock your credit file.
7. Not using your full legal name in financial documents. – Bank accounts, credit applications, and other documents that become part of your credit history come to be on your report through a variety of ways, many of which do not have many other identifying factors like your social security number. Using your full legal name helps to make sure that your information ends up on your report. According to a FDIC senior Consumer Affairs Specialist, it is not uncommon for a child and parent with similar names to show up on each others credit report.
8. Fines that add up. A $30 library fine or a $75 parking ticket. Who cares, right? Well, that could be changing, says Watts. More often nowadays, municipal governments are turning outstanding fines over to collection agencies, who have the ability to trash your credit rating if you don’t pay up. Watts says that if a collection agency reports you were not able to pay that overdue library fees or parking ticket, that could drop your credit rating by 100 points or more. “That will hammer your score,” says Watts. “Make good on that bill because you don’t know who is or who is not reporting to collection agencies.”
And while you may think you can’t be bothered with those petty fines now, just imagine how much more they’ll end up costing you if the collection agency mangles your credit score and you end up with a higher interest rate on that 30-year mortgage.
9. Mortgage, Auto Loan or Credit Card Shopping. Shopping for the best rate on your next home or auto? Looking for those 0% interest rate credit card offers to lower your payments? This could hurt your credit score, costing you in finance and interest charges. It is estimated that each “hard” inquiry can cause a five-point drop in your overall credit score. The dip will most likely show up about three weeks after the lender takes his look into your file.
10. Late payments – We all know this one, but did you know what can cost you 100 points? Keep reading.
The easiest way to lower your credit score is through delinquent payments or by skipping out on a bill altogether. Since your payment history makes up 35 percent of your credit score, failing to make the minimum payment within 30 days of the due date could send your score plummeting, says Craig Watts, a spokesperson for Fair Isaac. Say for example you’ve never missed a payment and have a credit score in the high 700s or low 800s. If you were to miss the 30-day grace period, your score could drop by 100 points or more. “That first delinquency puts you in a different class of consumers,” says Watts. “You can make up that 100 points but it will take a lot longer than it took for that score to fall.”