You may well be aware of the main factors affecting your credit scores. Some of these are taking out loans, applying for new lines of credit, and not paying your bills on time. But did you know there are other things–those which seem innocent–that can also harm your credit score? Here is a list of things that could be affecting your score.
1. When you dispute a credit card bill.
It is every consumer’s right to raise their concerns regarding errors or inconsistencies in their credit reports. Thanks to the Fair Credit Reporting Act, any data that is out-of-date, incorrect or which cannot be verified should be deleted from your credit reports. However, keep in mind that even though you have the right to dispute errors in your report, sometimes you have to hold back especially if you are trying to take out a loan or apply for new credit. This is because when you file a dispute, credit scoring agencies will not include the disputed account when they evaluate your credit score. So, if for example the disputed item concerns a certain credit card, they will exclude that credit card which can bring down your credit utilization rate. This, in turn, could damage your credit score.
On the other hand, there are instances when disputing a credit card bill does more good than harm. Sometimes people intentionally dispute a certain credit card with a high balance so that the credit reporting agency will exclude that account and, consequently, bring down their credit utilization to improve their credit scores.
2. When you pay your old debts.
Who would have thought that paying your old debts would bring down your credit score? To most consumers, this is the right thing to do; however, there are certain times when paying them back may damage your score. Repaying an old debt might, sometimes, bring down your score in the instance that the debt was not originally included in your credit report. Repaying it will cause it to appear on the report, creating a negative history. So, while paying your old debts is still the right thing to do, you might want to make sure that you don’t repay them right before you want to take out a loan or apply for a new line of credit. Instead, it may be better to wait and repay them after you’ve received the loan.
3. When you buy a motorcycle.
Yes, a motorcycle might mean you spend less in fuel costs, but buying one may have a negative effect on your credit score. Taking out a loan for a motorcycle is submitted to the credit bureaus as, what is referred to as, revolving credit. This makes the loan look like a huge amount of credit card debt. The reason that it affects your score is because 30 percent of your credit score is based on the amount of credit card debt you have.
4. When you make use of a business credit card.
It used to be that transactions made with business credit cards never showed up on personal credit reports. But, that is not how it works any longer. If you constantly use your business credit card, especially if you are liable for the debts charged, that could have an effect on your personal credit score.
5. When you only have one type of account.
Sometimes, having only one credit card is helpful, especially if you are refraining from racking up too much debt. However, 10 percent of your credit score is actually based on the types of credit you have. While 10 percent doesn’t really do much to damage your score, especially if you’re practicing good spending habits with your credit card, increasing your score by having a mixture of accounts wouldn’t hurt either. So, every once in a while, consider taking out a personal loan, a home mortgage loan, revolving accounts, etc., but only if you are financially ready and capable of repaying the debt.
6. When you apply for a new cell phone plan.
As it is with banks and lenders, there are some mobile companies that conduct hard inquiries on their clients. So if you keep on jumping from one mobile service provider to another, expect that that can hurt your credit score and bring it down.
People often get confused as to what they did that caused their scores to increase or decrease and the only way to really find out what the causes are is to view your credit reports on a regular basis. Make it a point to study your reports and scores every time you complete a major financial activity so that you may know what affected your score and whether or not the transaction was reported accurately. In addition, keep in mind the factors affecting your credit score listed above to avoid bringing your score down and damaging your financial health.