Building up credit is not as scary as some people think. The preconceived notion may be that you will sink yourself into debt by using your credit card, but if you use it in moderation, you will be able to keep yourself from overspending and build up healthy credit. Along with educating yourself about what helps improve your credit score, you should also be aware of what can have a negative impact. These are a few surprising things you should look out for:
Late fines and books
You are probably aware that missing a credit card payment can knock your score down a few points, but making late payments in other areas could also negatively affect your score. If you have an overdue library book sitting in your room or a parking ticket stuffed in a drawer, you may want to get them taken care of quickly because they can hurt your credit score as well. A late charge from your local library or a city fine that has yet to be taken care of can result in an expensive charge and the bill could also be sent to collections. The lender, in this case the library or city office, will hire a company to recover funds that are past due. This can impact your finances because collections can stay on your credit report for up to seven years.
Closing an account
If you have paid off your credit card, you may think that the next logical step would be to close the account, but this will actually negatively affect your score. By closing this account, you will be taking away the good credit you have accumulated and you will raise your credit utilization ratio. It would be better to leave this account open and just use it for small purchases.
Different types of hard inquiries
When applying for a new line of credit, an issuer will access your credit report, which is commonly referred to as a hard inquiry. Too many of these inquiries can affect your score. Keep in mind that credit cards are not the only area you can receive a hard inquiry. Starting a new cable subscription, signing up for a cellphone contract or even renting a car can result in a hard inquiry. So next time you sign up for something, ask the business whether they will be performing this task.