Credit scores are a tricky part of life. We all know the major factors that affect the score – but what about minor things? Are there other missed payments, accounts, or random activities that could hurt it as well?
Keep reading to learn more about the forgotten and overlooked ways you can damage your credit score.
Not Paying Utilities
While these non-credit payments won’t boost your credit score, failing to make payments or forgetting to close an account after moving can negatively impact it. Not paying on time on your current or old account can result in the utility company reporting your delinquency to the credit bureaus and turning your account over to a collection agency.
If you’re moving soon, set a reminder on your calendar to call your previous utility company 30 days after the move to make sure everything is completely paid off.
Closing Credit Accounts
Closing an account affects your credit score based on the credit utilization ratio. This ratio is the percentage of credit you’re using of the total credit available to you. For example, if you have a credit limit of $100 and use $10 of that limit, your credit utilization ratio is 10%.
When you close an account, the amount of total credit available to you shrinks, raising your percentage used. If you decrease your credit limit from $100 to $50, you’re ratio percentage is now 20%, so it looks like you are spending more money.
Closing an older card will also shorten the length of your credit history which can also lower your score.
Renting a Car
Rental car companies often ask for a credit card as the form of payment for a renting a car before accepting a debit card. This may seem fishy, but it makes sense when considering what’s at risk. They want to make sure you are a responsible borrower and can pay the balance to cover their assets.
If they allow you to use a debit card as a form of payment, they may run your credit to ensure proper borrowing, resulting in a hard pull on your credit report.
Breaking a Gym Contract
Be sure to read the fine print before signing your gym contract because it may not be so easy to get out of. Some people will set up automatic payments and tell their bank or credit card to put a stop-payment on the withdrawals if they want to cancel their membership early. The catch? The gym could then send you to collections and report it as a non-payment to the credit bureaus.
Ask the customer service representatives at your gym what it will take if you need to cancel your membership down the road. Thoroughly read the contract and make sure you understand when it will be over so you don’t risk having a membership you won’t use.
Paying Your Rent Late
Some property management companies will report you to the credit bureau if you make late payments. They can also ask a collection agency to collect on any payments you haven’t made yet and report you to the credit bureau.
To avoid this, set your rent to automatically withdraw from your account and set a calendar reminder for the first of the month to make sure it went through.
On top of being a responsible consumer, it’s a good idea to monitor your score with credit reports. Every year, Equifax, Experian, and TransUnion each allow you to access a report for free. Take advantage of this by reviewing the reports and setting goals for anything you want to improve the following year.