May 8th, 2012

4 Ways You Could Be Hurting Your Credit

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parking ticket

If you’ve been a long-time reader of the Credit Karma Blog, you know which financial moves can do some serious credit score damage: late bill payments, tax liens, bankruptcies, foreclosures and federal judgments, to name a few. But did you know that there are some other actions that can cripple your credit?

Make sure to avoid the following no-no’s to keep your credit in tip-top shape:

Neglecting library fines and parking tickets.

What’s the librarian going to do? Come after you, wielding an encyclopedia as a cudgel? Well, no. But the city might sick a creditor on you. Cities like New York, Chicago and Miami have started sending small debts, like unpaid municipal fines, to private collections agencies. Since accounts in collections will show up on your credit report, it will damage your credit score. You can see how much your score could drop with the Credit Score Simulator. Why are municipalities being so persistent? Well, just like the rest of us, they’re in dire financial straits, and they want to collect on their debts. If you have any unpaid tickets or fines, go ahead and take care of them ASAP.

Not using your credit cards.

If you’ve been letting some of your plastic collect dust, you might want to start using it again. As we discussed in “3 More Things You Might Not Know About Credit Scores,” some issuers have a policy of marking unused cards as “inactive.” While the account will remain open, the issuer may stop reporting the activity to the bureaus, potentially shortening your age of credit accounts and increasing your credit utilization rate. To show activity on your card, start using it again for small purchases each month and pay off the balance immediately.

Getting a cable hook-up.

Some cable and high-speed internet companies will run a hard inquiry on your credit when you sign up. It’s unlikely that this will happen—and they’re legally required to notify you before they do—but it’s good to keep in mind. The next time you’re getting new cable access, make sure to double-check that the company won’t be performing a hard inquiry. For more information about this, read “Hard Inquiries and Soft Inquiries.”

Using your debit card to rent a car.

While most rental agencies will require a credit card to cover the deposit for your rental car, some will accept your debit card. However, to protect themselves, they may pull your credit report if you’re paying with a debit card. This could potentially result in a hard credit inquiry, which will lower your credit score a few points. If you’re planning on renting with a debit card, ask first if the agency will be performing a hard credit inquiry.

14 Comments

  1. I would like to point out that the Chicago Public Library, in particular, does not send your fine to collections, but as always, this is something worth inquiring about.

    Jezebelee at 4:52 pm on May 8, 2012
  2. Thanks for the tip! And you make a good point–it’s a good idea to double-check with your library to find out if this is a typical practice.

    bethy at 5:01 pm on May 8, 2012
  3. Another one that not many people know about is keeping a high balance (above 30%) on your revolving debts. When I review a credit report, and the scores seem lower than they should be, that is the first thing I check. Its also one of the easiest ways to get scores up, pay the balance down to under 30% of the limit and viola.

    T.C. Strait at 7:47 am on May 10, 2012
  4. Thanks for the tip, T.C.! And you’re right. Your credit utilization rate is an important factor of your credit score.

    bethy at 10:45 am on May 10, 2012
  5. In my case your viola is getting more impossible to achieve. I was paying down my credit card, so the bank lowered my credit limit! I was using less than 50% of my credit before. When they lowered it, now it looks like I’m using 90%!!!!! There is no way I can ever get my score up if this is the tactic the bank is going to use to keep it down! If this is not illegal, it should be!!!

    Sunshine at 11:03 am on May 15, 2012
  6. I agree with you sunshine..

    Norris at 7:43 am on June 7, 2012
  7. It seems a loosing battle sometimes. I have paid down over $7,000 in debt over the past 3 months. At first my score raised 18 points, then another 6, then I made a small $113 purchase on a zero balance card and now my credit score went down 5 points. It’s very frustrating they don’t give you credit for trying to improving your credit.

    Baffled at 1:21 pm on June 14, 2012

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