We often get told exactly what we need to do to build up our good credit, but there are also small things we’re doing that we might be causing our bad credit and not even know it.
And while many of us assume it’s simply a matter of stopping our overspending and paying off our balance in full every month that will save us, there are also several surprising ways we’re causing ourselves to have a low credit rating not even know it until now.
Society is becoming increasingly dependent on credit to make purchases and financial decisions. A good credit score is used for more than just getting a credit card or a loan. Credit scores demonstrate your history of paying your debts to entities that loan you money.
Here Are 5 Unexpected Things Ruining Your Credit
5. Paying off your credit card too quickly
It seems counterintuitive but paying off your balance as soon as possible can affect your credit score the same way as missing a payment altogether. Carrying a balance, even for a short time, shows you’re using your credit and as long as you’re paying your debt back eventually (and on time), using your credit this way will have a positive effect overall.
Your best bet? Save credit purchases for larger items that you can pay back both principal and interest on over several months.
4. Closing old accounts
Do you have a credit card you haven’t used in a long time, and you’re thinking about closing it? Think again. Your credit score has as much to do with your debt ratio and on-time payments as it makes your long term credit history.
Obviously, there might be a perfect reason to close out your account, but think twice, and when in doubt, contact your bank and ask to speak to a banking specialist. And while you’re there, don’t forget to ask how you can save for retirement!.
3. Missing even one payment
Sometimes it happens – despite our best-laid plans, we might miss a payment during an incredibly hectic month. But missing even one payment can ding your credit before you have a chance to get caught up.
The solution? Pay your late payment as soon as possible within 30 days of the initial missed payment. Creditors have to wait 30 days after the missed payment to report the miss before it will affect your credit. And if you’re going to be really late? Better call your creditor and try and make alternate arrangements.
2. Renting a car
I bet you didn’t know that renting a car can negatively impact your credit rating! If you’re thinking about renting and saving some credit for your trip, think again — while you think it might be better to use a debit card instead of your credit card to rent, many car rental companies not only check your credit rating before renting you a car via debit, but they also may hold your rental deposit for up to 15 days, impacting the cash you have available to you.
Even the rental company’s credit check can impact your credit score. If the company’s statement is considered a ‘hard inquiry’ (like when you apply for new credit), it will decrease your credit score by several points.
1. Cancelling zero-balance credit cards
You’ve paid off your credit card congratulations! But before you decide to cancel the card altogether, consider holding on to it. When you cancel a card, it reduces your total credit amount, which, if you hold balances elsewhere, will raise what’s called your credit utilization ratio, meaning you’ll have higher debts but less credit overall. It may also shorten the age of your credit history, making it look like you haven’t had good standing for very long.