Attaining and maintaining a good credit score is important because you could get a lower interest rate on your mortgage, potentially saving you tens of thousands of dollars over the life of your mortgage. In order to get the highest credit score possible we’ve all heard the typical advice for keeping good credit:
- Pay all of your bills on time
- Don’t open a bunch of credit cards at once
- Don’t file for bankruptcy unless absolutely necessary
- Keep an eye on your report to make sure everything is accurate
Those are the big things. But there are some little things… really strange things… that can add up when it comes to keeping your credit reports clean.
Getting cable or internet
There are some Internet and cable companies out there that will run a hard inquiry on your credit when you sign up for their service. A hard inquiry occurs almost any time you apply for credit – credit card, car loan or home loan, etc. A hard inquiry negatively impacts your credit score by a little bit. If you have too many hard inquiries at once, it can really ding your credit. The company has to have your permission in order to do this, so it shouldn’t come as a surprise.
Using a debit card to rent a car
Most rental agencies require that the deposit be paid with a credit card. Some will agree to accept a debit card if you’ll allow them to perform a credit check on you, resulting in… you guessed it… a hard inquiry.
Buying a new motorcycle
If you decide to buy a motorcycle, you should know this: Motorcycle loans are sometimes not reported to the credit bureaus as vehicle loans. Instead they are reported as revolving credit, which makes them look like a big chunk of uncollateralized credit card debt. Thirty percent of your FICO score is based on how much credit card debt you carry.
Many toll booths in the country have switched to “toll by plate” systems where the vehicle has a tag in the windshield or on the license plate and the owner is sent a bill every month for toll road usage. Just like anything else, if you neglect to pay the bill on time, it’s reported.
Although libraries don’t report directly to credit reporting agencies, many of them turn over unpaid balances to collection agencies, which do. Don’t let $4.00 in late fees ding your credit score.
There are a number of shows on TV depicting auctions of abandoned storage units. In addition to losing all of the stuff they had in those lockers, the delinquent owners have another thing in common: they all have a negative line on their credit report because the storage facility will turn over any remaining balance to a collection agency.
Taking advantage of a 0% financing promotion at your local furniture store looks like a good opportunity to take advantage of free money. However, your credit could suffer because you’re adding a high balance loan to your credit report and could increase your credit utilization rate since the furniture loan is essentially maxed out.
It doesn’t seem like a big deal, does it? An increasing number of cities are turning over unpaid parking tickets over to private collections agencies.
A collection action by any business can lower your credit score by up to 100 points or more when it shows up on your credit report. It can remain on your credit report for up to seven years, affecting your credit score for years to come.