Your credit score is an important aspect of your financial life, as it affects your ability to obtain loans, credit cards, and even some jobs. Most people know that paying bills on time and managing their debt are key factors in maintaining a good credit score, but there are many surprising things that can affect it as well. In this article, we’ll explore 15 lesser-known factors that can impact your credit score, so you can be better prepared to maintain and improve it.
1. Library Fines and Unpaid Tickets
Believe it or not, library fines and unpaid tickets can negatively impact your credit score. When left unpaid, these fines are often sent to collections, which is reported to the credit bureaus. This can result in a drop in your credit score, so it’s important to pay any outstanding fines or tickets promptly.
2. Closing Old Credit Accounts
While it may seem like a good idea to close old or unused credit accounts, doing so can actually hurt your credit score. Closing accounts can reduce your overall credit limit and increase your credit utilization ratio, which can lead to a lower credit score. It’s better to keep old accounts open, even if you don’t use them frequently.
3. Applying for Multiple Credit Cards or Loans
Every time you apply for a credit card or loan, a “hard inquiry” is made on your credit report. While one or two inquiries aren’t likely to cause significant damage, multiple inquiries within a short time frame can lower your credit score. Lenders may view this as a sign of financial distress, so try to space out credit applications.
4. Renting a Car with a Debit Card
When you rent a car using a debit card, the rental agency may perform a “hard pull” on your credit report, which can lower your credit score. To avoid this, consider using a credit card for car rentals or ask the rental agency about their credit check policy.
5. Child Support Payments
Failing to make child support payments can have a negative impact on your credit score. Missed payments are reported to the credit bureaus and can remain on your credit report for up to seven years. To protect your credit score, make sure to stay current with child support obligations.
6. Co-signing a Loan
Co-signing a loan means that you’re legally responsible for the debt if the primary borrower defaults. This can result in a higher credit utilization ratio and an increased risk of missed payments, both of which can lower your credit score. Before co-signing, carefully consider the potential consequences.
Divorce can indirectly affect your credit score, particularly if joint accounts are mishandled or if one party fails to fulfill their financial obligations. To minimize the impact on your credit, work with your ex-spouse to settle joint accounts and remove your name from any accounts you’re no longer responsible for.
8. Inaccurate Information on Your Credit Report
Errors on your credit report can lead to a lower credit score. It’s essential to regularly review your credit report and dispute any inaccuracies to maintain an accurate credit score.
9. Ignoring Medical Bills
Unpaid medical bills can be sent to collections and appear on your credit report, causing your credit score to drop. To avoid this, work with healthcare providers to set up payment plans or negotiate reduced rates.
10. Overdraft Protection
While overdraft protection can help you avoid overdraft fees, it can also affect your credit score if not managed properly. If you frequently use overdraft protection, lenders may view you as a higher credit risk, which can result in a lower credit score.
11. Unpaid Taxes
Owing money to the government can also damage your credit score. Unpaid taxes can result in a tax lien, which is a public record that appears on your credit report and can significantly lower your credit score. To avoid this, make sure to pay your taxes on time or work out a payment plan with the IRS.
12. Defaulting on Student Loans
Student loan default can have a lasting impact on your credit score. Defaulted loans are reported to the credit bureaus, and the negative mark can remain on your credit report for up to seven years. To avoid default, consider options like loan deferment, forbearance, or income-driven repayment plans.
13. Business Credit Cards
Some business credit cards report your activity to personal credit bureaus, which can affect your personal credit score. Be mindful of the card issuer’s reporting practices and manage your business credit responsibly to minimize any potential impact on your personal credit score.
14. High Credit Card Balances
Even if you pay your credit card balance in full each month, a high balance can affect your credit score. Credit bureaus consider your balance at the time it’s reported, which might not coincide with your payment date. To keep your credit utilization ratio low, consider making multiple payments throughout the month or requesting a higher credit limit.
15. Changing Jobs
While changing jobs doesn’t directly impact your credit score, it can affect your ability to obtain credit. Lenders may view job changes as a sign of instability, especially if you switch industries or experience a reduction in income. To mitigate this, try to maintain a stable employment history when possible.
Your credit score is influenced by a wide range of factors, some of which may surprise you. By being aware of these lesser-known factors and managing your financial life responsibly, you can maintain and even improve your credit score over time. Remember, a good credit score opens doors to better loan terms, lower interest rates, and more opportunities for financial success.
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