We all know that paying credit card bills on time is a surefire way to keep credit scores in good standing. Keeping spending in check is only part of the equation. It's not always the things we do that effect us, sometimes the little things we don't do can add up to a surprising negative check in our column. Before engaging in seemingly harmless activities involving credit consider the consequences. Here are eight shocking ways you can accidentally hurt your credit score.
1. Not checking your credit report - Pretending your credit score doesn't exist won't make it go away. Errors do occur and the only way to correct them is to know about them and take action. Once a year I request my free credit report from AnnualCreditReport.com. It's the "only authorized source for the free annual credit report that's yours by law" according to the Federal Trade Commission. Checking your report can also alert you to identity theft.
2. Inconsistent payment history - Missing a payment here or there can hurt you, even if you pay on time "most of the time." Thirty-five percent of your credit score is based on payment history. On one of my accounts I missed a payment after consistently paying on time for more than 18 months, thanks to a power outage during a hurricane and a late paycheck. I called the company and asked for a one-time exception to the late fee. I made the payment and they waived the fee and did not report the bump in my payment history.
3. Maxing out cards - The credit card company trusted you with that big credit limit, so you should use it, right? Wrong. High credit limits are good but actually using them is bad. You should aim to have a substantial gap between how much you owe and your actual credit limit. For example, I have a credit card with an $800 limit. I use it mainly for gas to free up my debit card for cash. I pay it off every month, and it never exceeds $200.
4. Paying some is not better than all - When a creditor offers you a lower pay-off amount than you owe and you agree to pay it, it can hurt your credit score. Although you paid a portion of the debt, it may still appear as a "charge-off" on your report. Instead, work out a manageable payment plan.
5. Closing all your credit card accounts - If you have more than one credit card account and need to close one or more, choose wisely. Keep the credit card you've had the longest or the one with the best interest rate open. Even if you close your oldest account, though, the card's history will remain on your report.
6. Closing your only credit card account - Having a credit card account contributes to your overall credit score. Keeping one in good standing trumps having none at all.
7. Divorce - Your credit score may be the last thing on your mind when you divorce. If you have a spouse as an authorized user or have a joint credit card, your credit score can be affected by the other person's spending and payment habits. Even if a divorce decree states one party is responsible over the other, the credit bureaus may still lower your credit score because of late payments.
8. Speeding - Leave an extra 10 or 15 minutes early rather than join the speeders on the road. Speeding can lead to tickets, including photo radar tickets. If you choose not to pay the ticket, or any other fine or fee issued by a government agency, it will go to collections. Pay it and fight it later. Risking your credit score and future borrowing ability is more important.
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