It goes without saying: maintaining a good credit rating is essential to obtaining mortgages or loans in the future. Most people understand what can affect their credit rating: missed payments, bankruptcy, and so on. However, there are a number of unexpected factors that can affect your credit score that; hitherto, you may have been unaware of.
Closing a credit card account
Closing a credit card account can have a major effect on your credit score. While you might think that it’s a good idea to get rid of accounts that you no longer use, they may have contributed favourably to your overall credit rating. Once a closed account is removed from your record, the positive credit rating which you had previously earned disappears with it. The result is a lower score overall, thus it is best to consider very carefully before closing any accounts.
Late library books
It’s easy to forget to return your library books. What you may not know is that forgetting to take your books back in time can have harsh consequences on your credit rating if the bill gets sent to a collections agency.
Barry Paperno, Credit.com’s community director, says: “Collections that can seriously hurt your score can arise from parking tickets and library fines, as much as from medical bills and credit card charge-offs – with the impact to your score being similar.”
One single late payment
Just one single late payment can result in a lower credit score. Many people make the false assumption that they will need to miss a few instalments before their credit score is affected. There need be only one late payment on your account for it to be detected by a credit issuer and have it negatively impact your credit rating.
Having a credit card but no loan
It is important to remember that an important component of your credit score is your diversity of accounts. You need to show you can handle both revolving (credit cards) and non-revolving (loans) types of credit. This means that if you only have one type of account it can negatively affect your score.
Applying for credit
Most people understand that getting turned down for credit can have a negative effect on your credit score. However, what many people don’t know is that every application for credit results in what is known as a ‘hard inquiry’ being placed on your record. The strange fact is that it makes no difference whether you are accepted or rejected in your application.
Hiring a car
Some rental car companies will do ‘hard inquiries’ on your credit which will negatively affect your score. These ‘hard inquiries’ will lower your score and stay on your credit file for two years.
When couples divorce they split all their assets as well as any debts. Your joint account and your mortgage will remain on your account, regardless of who takes on the mortgage repayments. One area to be aware of is that of bankruptcy. If your ex-partner declares bankruptcy, you may find the debtors chase you for outstanding balances on joint accounts.
Photo Credit: Flickr/Philip Taylor