10 Surprising Things That Could Hurt Your Credit Score

You need credit to get credit.

You need credit to get credit.

A shiny credit score opens doors to homeownership, a new car and credit cards. Without a good credit score, you pay more in interest rates and insurance premiums. You face flat-out denials with financial doors slamming in your face. Paying your bills on time doesn’t guarantee a good credit score. Many surprising things can hurt your credit score.

Unexpected Credit Inquiries

Each application for credit affects your credit score and stays on your report for two years. Unexpected credit inquiries can hurt your credit score; renting cars, opening bank accounts, requesting a credit line increase and opening a cell phone plan all generate hard inquiries to your credit report.

Using Business Credit Cards

Once upon a time, business credit cards stayed with your business. This rule no longer holds true. Business credit cards now require a personal guarantee from the account holder. Each charge on your business card can now affect your credit score. Charge too much on your account and your utilization lowers your credit score.

Inactivity

The current suggestion for credit card use is to charge only a small amount to your card -- between 10 and 30 percent of your limit. Charging nothing to your credit card helps your debt load but hurts your credit score. After a period of inactivity, your card issuer could close your account, which lowers your available balances and account age.

Credit Card Disputes

When you dispute an account, the credit scoring algorithms may not add that credit line into your credit score. Applying for credit while disputing a credit line could have unexpected results. Depending on the account disputed, you could lower your account age and increase your utilization.

Closing Old Accounts

The age of your credit accounts affects your credit score and comprises about 15 percent of your score. When you close old, unused accounts, you lower your credit score. Keep your oldest lines open for a healthy credit score.

Not Reporting Credit Limits

Your total balances and available credit influence your credit score. When your credit card doesn’t report your limit, it looks like you are maxed out on the card. Contact your card issuer and ask for your limit to be reported.

Paying Old Debts

Paying old debts helps your financial situation but could hurt your credit score. When you pay an old debt, it could suddenly reappear on your credit report and lower your score. It could also re-age the account causing it to stay on your report for longer.

Debt Settlement

When you settle a debt with a creditor, you save money, but it hurts your credit score. The account entry on your report shows you paid less than owed, which is a negative entry on your report that lowers your score.

Credit Counseling

Credit counseling doesn’t hurt your credit score. However, when your credit counselor begins settling your debts, it could sink your score. The account is noted as settled or a partial payment. According to Credit Sesame, debt settlement hurts your credit score.

Divorce

Filing for divorce doesn’t hurt your credit, but the separation of credit could tank your scores. When you are a co-signer on an account, you are reliant on your ex-spouse to pay the bills or you must do so. Failure to pay the bills causes late payments and negative account entries lowering your credit score.

 

About the Author

Leigh Thompson began writing in 2007 and specializes in creating content for websites. She has been published online in various capacities. Thompson has an associate degree in information technology from the University of Kansas and is working on a bachelor's degree in business and personal finance.

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