We all have heard the typical advice on how to get a good credit score:
• Pay off your bills on time
• Don’t apply for new credit cards frequently
• Don’t file for bankruptcy
Most of us can understand these, but there are some lesser-known actions that can harm our credit scores. Some of them are, in fact, downright strange. And having little knowledge about them will get you into really bad financial problems.
So, here are the top five strange things that could hurt your credit score.
1. Ordering TV channels
So you just got into a new apartment and can’t wait to order cable TV? Here’s a warning: some cable companies and high-speed internet providers will perform a hard inquiry on your credit report when you sign up for their services. Typically, a hard inquiry is done when you apply for a loan, like a mortgage or a credit card. This type of inquiry will harm your credit score, but this is very little, 5 points to be precise. However, several hard inquiries can cause real damage to your credit.
Fortunately, any business or company can only perform hard inquiry on your credit after you give them the permission to do so.
2. Renting a car using a debit card
Most rental companies require you to pay a deposit with a credit card, but some will agree to accept a debit card to do it, unless you agree to allow them to perform a credit check on you, which will require a hard inquiry. So, before you rent a car, check with the rental company and ask them if they’ll perform a credit check on you, so you’ll be prepared to pay your deposit with a debit card.
3. Not using any credit cards
Its true having a lot of debt on your credit cards is bad for your credit score. But at the same time, not using your credit cards can also bad. Some credit card companies will tag your credit cards “inactive” after a certain period of time of being unused, and can even close your credit card account. If this happens, then it will reduce the number of credit accounts you have, which will affect your credit utilization rate. Credit utilization rate is the ratio of your total credit to the total credit allocated to you. Since an inactive credit card’s credit limit isn’t available to calculate your overall credit utilization rate, then that rate will increase. And a higher credit utilization rate will lower your credit score and vice versa.
4. Financing the purchase of goods
You most likely have seen the offers, “0% financing for the first 12 months on a new television! Sounds great, right? Buy the television now, pay much, much later. But as lucrative this sounds, this great deal isn’t good for your credit score. Why? Because a financing plan like this is generally categorized as “last resort” loan by lenders assessing your creditworthiness. Lenders may view you to have high credit risk, just because you wanted that deal on the television.
Your credit score could also get affected as a new loan is added on your credit report. This takes us back to your credit utilization rate, because the television loan is basically maxed out (as you didn’t make a payment), which is increase your credit utilization rate.
5. Not paying that parking ticket
So you forgot to pay off that parking ticket you got when you went shopping in the city, doesn’t matter, right? Wrong. A parking ticket that’s unpaid or a library fine could eventually be sent for collections. Some cities like New York, Chicago and Miami, are turning their unpaid parking tickets and library fines to private collections agencies.
A collections account is a negative mark on your credit report that can do substantial damage to your credit score. So, if you still have that parking ticket or library fine, then better pay them off as soon as possible, so you don’t have to see a collections account in future.