10 Surprising Ways to Negatively Affect Your Credit Score
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A credit score is supposed to be about how you handle credit, so it seems counterintuitive that non-loan actions can bring your credit score down.
Unfortunately, the reality is that even if you aren’t borrowing money, you could still be hurting your credit score. Here are 10 actions that can bring down your score even though they have nothing to do with applying for or receiving credit. (See also: Surprising Things That Can Kill Your Credit)
1. Skip the Rent
Even though Experian recently started reporting on-time rent payments on consumers’ credit reports, you probably aren’t going to get credit score brownie points for paying the rent right when you should.
Don’t let that fool you into thinking that you can skip rent payments or pay your rent late on a regular basis without a negative impact on your score, though. If your landlord decides that he or she is sick of your slow payments, you can be reported to the credit bureaus.
On top of that, your landlord can ask a collection agency to attempt to collect on your delinquent payments. Once that happens, the credit bureaus find out and report it. Now your non-credit rent payment is dragging your credit score lower.
2. Failure to Pay Medical Bills
With the rising costs of health care, even those with health insurance can find themselves facing high medical bills. Don’t ignore these bills, though. Health care service providers can decide to report your unpaid bills to the credit bureaus or send your account to collection. Collection accounts look especially bad on a credit report.
Many hospitals and other health care providers are willing to work with you on large bills. If you can pay a large portion of the bill immediately, you might be able to get a discount on your health care. Or, if you can’t pay a large portion, you might be able to work out a payment plan. Realize, though, that you might be charged interest, or a fee, for a payment plan.
3. Ignore Library Fines
For many people, the idea that a $5 library fine could be harmful to their financial situation seems silly. However, not paying could cost you even more than what you owe. In order to collect more money and help ease strained local budgets, some libraries have been sending unpaid fines to collection agencies.
Once your library fines go to the collection agency, it appears on your credit report. On top of that, the collection agency might add its own fees to the fine. Your $5 library fine could easily balloon into a $20 or $30 cost — and bring down your credit rating on top of it all.
4. Rack Up the Back Taxes
Your unpaid back taxes aren’t just a matter between you and the government. If you end up racking up unpaid taxes, the government can place a lien against you. A tax lien is one of those public records items that appears on your credit report and can drag down your score.
A tax lien can be especially aggravating, since it will remain on your report for up to 15 years.
5. Miss Utility Payments (or Don't Completely Close Accounts)
Utility bills represent another of those non-credit payments you make regularly that aren’t likely to help your credit score. While there are alternative credit reporting agencies that you can ask to collect information on your utility payments, the credit scores that most financial services companies look at don’t include on-time utility payments.
However, like medical bills and rent payments, if you habitually pay late, or miss a payment altogether, the utility company can report your delinquency to the credit bureaus — and turn your account over to a collection agency.
This happened to me once. When I moved from New York, the final bill slipped through the cracks. I didn’t realize I wasn’t up to date on the account until I got a collection notice a year later and I doubled-checked my records. My credit score headed temporarily lower on the news.
Make sure you pay your utility bills on time. And, if you move, make sure you are completely settled with the company. Even an address forward might not be enough to catch all your final bills; 30 days after your move, call the utility companies and make sure everything is squared away.
6. Buy a New Cell Phone (or Sign Up for Utilities)
Increasingly, cell phone providers are checking your credit when you sign up for a contract. In some cases, the company performs a soft inquiry, and your score isn’t damaged. Other times, though, the provider runs a hard credit check. It looks as though you are applying for credit — even though you don’t think that you are.
These types of hard credit inquires can weigh on your credit score, pulling it down. A similar effect can be seen when you sign up for cable or satellite TV services, as well as for Internet service. When you sign up for a new telecommunications service and the company asks if they can run a credit check, ask if it’s possible for a soft inquiry instead of a hard inquiry.
7. Open a Bank Account
Not all financial institutions check your credit before you open an account, but some banks and credit unions do. Indeed, one of the reasons that your checking account might be denied is due to your credit report.
Once again, you need to find out whether the bank is performing a hard credit pull or a soft credit pull. A soft pull isn’t going to bring your score down, but if the bank performs a hard inquiry that looks like you are applying for credit (even though you are just trying to open a checking or savings account), it could ding your credit score.
8. Cancel Your Gym Membership Improperly
Many consumers choose to pay for a monthly gym membership automatically using an automatic withdrawal or putting the monthly fee on a credit card. This streamlines the process, but it can also cause problems down the road if you aren’t careful.
Gyms often have cancellation procedures that you are supposed to follow, usually involving paperwork. If you don’t fill out the paperwork to cancel, but contact the credit card or the bank to stop allowing the automatic payments, you could find yourself in trouble.
Your gym might report it as non-payment to the credit bureaus. Additionally, your account could be turned over to collections. Even if you don’t have an automatic payment arrangement, some gyms might take these actions if you don’t fill out the appropriate cancellation paperwork.
When you sign your gym membership agreement, make sure you understand what actions you need to take in order to cancel your gym membership — and find out what the gym will do if you don’t follow proper procedure.
9. Disregard Traffic Tickets
Are you a traffic scofflaw? If you have unpaid parking tickets or you ignore speeding tickets and other violations, your credit score could suffer. Not only will city and state governments add more penalties the longer you ignore your tickets, but they could decide to report them to the credit bureaus as debts. And, of course, there is always the risk that a collection agency will get involved.
Don’t think that a violation in another state can be safely ignored, either. Whenever a ticket is written out, your license plate number is recorded, and it is run. They know who you are, and they aren’t afraid to report you. It may take a little longer, but unpaid tickets will eventually catch up to you.
10. Close Unused Credit Accounts
When you aren’t using your credit accounts, it makes sense to close them, right? After all, it’s not like you are borrowing money with those accounts anymore. Unfortunately, closing those unused credit accounts can have a negative impact on your credit score.
First of all, those credit accounts are contributing to the amount of credit you have available. Because your credit utilization and available credit matters to your credit score, you want to show that you aren’t using up as much of credit as you could be. Once you close those unused accounts, you suddenly have less credit available. And, if you occasionally carry a balance on your other cards, your credit utilization has increased.
Next, you have to consider the length of your credit history. The older your credit accounts, the better it is for your credit score. Your credit accounts have an “average age,” and if you close your older accounts, you could find yourself with a shorter credit history. The result could mean a lower credit score.
Before you close an old, unused credit card, reconsider. Think about how long you’ve had the account, and how it has been helping your credit history length.
Most Financially Related Actions Affect Your Credit Score
Even when you aren’t borrowing money, your financial actions can impact your credit score. Missing a utility payment or skipping out on a library fine might seem like no big deal, but if you don’t take care of it, and let it sit, the end result can be a lower credit score.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.