Ten Surprising Things That May Affect Your Credit
Watch out for these 10 things that can sabotage your credit rating.
If you intend to apply for a credit card or loan, having good credit can go a long way toward helping you receive the financing you're after or qualify for a higher amount. Many things can impact your credit score, however, and not all of them are obvious.
Here are 10 things you might not know are affecting your credit:
1. Hard credit checks
There’s a difference between soft credit checks and hard credit checks. Soft checks are when you check your own credit, or a lender checks it to preapprove you for an offer. These don't have an impact on your score. Hard credit checks occur when you apply for a card or a loan, and these do have an effect.
2. Applying for multiple credit cards
One of the most obvious ways to build your credit is to apply for credit cards, get approved, use them, and keep your balance low. But did you know that simply applying for multiple cards can have an impact on your credit score?
3. Applying for multiple loans
Just like applying for multiple credit cards can impact your score, so can applying for multiple loans. These bring about hard credit checks.
4. Closing old credit card accounts
You might think that closing an old credit card account that you no longer use could be a positive influence on your credit score, but in reality the opposite is true.
As MoneyTalksNews explains1, "Closing an account impacts what’s known as your credit utilization ratio: the percentage of your available credit that you are using. This ratio affects both FICO credit scores and VantageScore credit scores. The lower your ratio — meaning the less of your available credit you’re using — the better your credit score will be. Closing a credit card account that you’re not using would decrease your available credit. That would in turn increase your credit utilization score, hurting your credit score."
5. Closing a credit card that still has a balance
The same is true for closing a credit card that still has a balance. This makes it look as if you are ignoring your debt, and can lower your score and raise red flags among credit/loan issuers.
6. Any late payment
You're more than likely aware that not paying your credit card bills on time will negatively affect your credit score, but did you know that paying any of your bills late can potentially have the same effect? Even if you ordinarily pay all your bills on time, missing one by a month or more is an indication to creditors that you are having financial issues and doesn't bode well for your credit score.
7. Co-signing on a credit card application
Your credit can even be affected by someone else's failure to pay bills on time. If you co-sign a credit card application, you are on the hook along with the card recipient. It's really not a good idea to co-sign unless you are absolutely sure that the card recipient will handle things responsibly. You must be prepared for the chance that it doesn't work out that way 100 percent of the time.
8. Car rentals
Even booking car rental reservations can have an impact on your credit. The reason is that they may have to run a credit screening on you to be sure you're someone they want to rent a car to, particularly if you pay with a debit card.
9. Failing to properly close a gym membership
If you have a gym membership and wish to stop going there at some point, be sure you properly cancel your account rather than just stop showing up and stop paying.
10. Not having a mix of credit cards and loans
Believe it or not, only having credit cards or only having loans is less ideal than having a mix. Having one or the other may seem like the right way to go for the purposes of debt, but having both cards and loans can indicate a more responsible consumer, assuming you keep up with payments.
*Loans subject to credit approval, terms and conditions apply. See banker for details.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of Zions Bancorporation, N.A. Member FDIC