Take Me Higher
The sneaky things that bring down your credit score
Decided you simply cannot live without your Girls fix? Be aware that some cable and Internet companies require a credit check before completing your installation. If they conduct a hard inquiry--which is what happens when you apply for a mortgage or credit card--it’s possible that your score will drop slightly. (How much depends on your credit history.)
Everything in moderation, right? Well, that includes actually using your credit cards. When you don’t, some issuers will designate the card as inactive or even close the account. When that happens, your credit utilization rate (total credit-card balance in relation to total credit-card limit) goes up, and your score goes down.
Some companies won’t even allow you to pay for that subcompact with a debit card. But if they do, expect them to review your credit history before they approve you--which, as you now know, inherently lowers your score. Our suggestion: Pay with cash or credit.
Provided you pay your bill in full each month, charging virtually everything on your credit card can be a great way to track your expenses and rack up a bunch of rewards points. (Hello, airline miles.) But if you need to increase your limit to do so, be prepared for your score to dip slightly for a short period.
OK, so you had Fifty Shades of Grey under your bed and “forgot” about it for seven months. If your local library turns the charge over to a collection agency (and some do), your score could take a hit. The same goes for parking tickets, so be sure to pay those in a timely fashion.
Still fighting the stupid radiology department for that errant double charge? Don’t be surprised to see your credit score go down if the hospital turns your delinquent bill over to a collection agency. To avoid a penalty, call your doctor’s office ASAP and ask them not to report it. Or pay the bill out of pocket and file a reimbursement claim.
In the long run, ditching debt is a good thing. But paying off an installment loan in full can negatively affect your score in the short term, particularly if you don’t have any other debt. Why? Doing so reduces your “credit diversity,” something that the credit bureaus consider when calculating your score.
Those zero-money-down, no-interest-for-three-years offers from your local furniture store sound a little shady... precisely because they are. Credit bureaus consider this type of borrowing to be a “loan of last resort,” and as a result they penalize your credit score. Just say no. Then hit up that cheap estate sale.