There are things you can do to improve your
credit. Most people know what they are including paying your bills on time.
However, there are a surprising number of things that can hurt your credit
rating, and many people are not aware of what they are.
The following are seven
actions or inactions that can hurt your credit rating. Many can be avoided, so
pay attention to which ones apply to your personal finances.
Applying for too many credit cards or loans
Every time you apply for any type of credit
card or loan there will be an inquiry noted on your credit report. This also
includes such things as applying for a new phone service contract. Too many of
these inquiries will lower you credit rating slightly. Most people will not
notice a change in their credit unless they have a very high credit rating.
Not paying your utility bill
Although you get no good marks for paying
your utility bills on time, if you do not pay them your credit can be
negatively affected. Setting up an auto bill pay online can often help you
avoid missing these monthly payments that can slip through the cracks.
Not using a credit card for a long time
You may have tried taking the advice of
some finance gurus and sticking your credit card in a block of ice in the
freezer to stop you from overspending. Surprising enough, credit agencies take
periods of activity into account and will lower your score slightly with
accounts that are not used.
Closing a credit card account
Closing a credit card account can hurt your
credit score because your total available credit is a factor in computing your
overall credit score. When an account is closed, you will have less credit than
previously available.
Not paying your parking tickets
Many municipalities will turn over
outstanding parking tickets to a collection agency and report the unpaid
tickets to a credit agency. Not every city will do this, but there is no reason
to take a chance with it. Always pay your parking tickets to avoid having them show
up on your credit.
Bankruptcy
Often a person will have to declare
bankruptcy and a few years later not realize that the bankruptcy is still on
their credit report. Bankruptcies can stay on a credit report for up to 10
years. When it is finally dropped from the credit report your credit rating
will shoot up.
Inaccurate information
This is a huge factor in many credit
ratings. Few people are aware of the amount of inaccuracies that are listed on
their credit reports. In most circumstances, this information will be harmful to
a credit rating. It is for this reason that you need to check for problems by
getting a copy of your credit report. Keep in mind that there are three
different credit agencies.
In conclusion, maintaining a good credit rating requires more than just paying your bills on time. Awareness of actions that can inadvertently harm your credit is crucial. Applying for too many credit cards or loans can lower your score due to multiple inquiries. Neglecting to pay utility bills or parking tickets can result in negative marks on your credit report, while not using a credit card for extended periods or closing accounts can also reduce your credit score by affecting your total available credit.
Moreover, the long-term impact of bankruptcy should not be underestimated, as it can linger on your credit report for up to a decade. Additionally, inaccuracies on your credit report can significantly damage your credit rating, making it essential to regularly review your credit reports from all three major agencies for errors.
By understanding and avoiding these common pitfalls, you can better manage your credit and maintain a healthier financial profile. Regularly monitoring your credit, using credit responsibly, and addressing any discrepancies promptly will help you sustain a favorable credit rating, ultimately benefiting your overall financial well-being.
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