Six Surprising Things That Can Affect Your Credit Score

By Mike Peterson
In February 19, 2016

Six Surprising Things That Can Affect Your Credit Score

Ask most people what kinds of things can bring down your credit score, and you’ll likely hear the expected responses:  Paying your credit card bills late.  Maxing out your credit lines.  Having a high debt-to-income ratio.  Opening too many credit cards.  Closing a credit card once you pay it off.

You don’t have to have an extensive background in credit cards or debt to know that late payments and irresponsible credit card use can be devastating to your credit score.  But there’s more to your score than simply using credit cards wisely.  Credit is complicated, and there are quite a few small things can have a big impact on your credit score.

Here are six that might surprise you:

  1. Library fines and other municipal debts. Overdue books don’t normally carry a lot of weight as far as your credit score goes. Let your fines languish unpaid for too long, though, and your library might just turn your case over to a debt collection agency – and at that point, credit reporting agencies will take notice. But library fines aren’t the only fees that can get you in trouble: Some cities will turn outstanding parking tickets, tolls, and other unpaid municipal fees over to collections agencies, too.
  1. Renting a car with a debit card. Most major car rental companies will let you use a debit card to rent a vehicle. That said, there are many more strings attached because these companies view debit card users as more of a risk than their credit card users.  So, they take measures to protect themselves.  Most companies place a super-inconvenient hold on your checking account, essentially locking up $100 or more of your hard-earned cash for the duration of the rental.  Even worse, though, is that many companies do a credit check on debit card users.  And I don’t mean that they run a soft inquiry, either: Many companies pull a hard inquiry, and hard inquiries always bring your credit score down a few points.
  1. Starting (or switching) cell phone service. This one varies by provider:  Some cell phone companies will run a soft inquiry and leave it at that.  Others will go with a hard inquiry.  If you’re in the market for a new provider, you might want to ask a customer service rep about their process.  If you’ve got decent credit, it might be worth it to take a hit to get a great new cell phone plan – but if you’re concerned about dropping a few points you might want to look elsewhere.
  1. Not having “diverse” debt. When it comes to building a great credit score, responsible credit card use is huge — but it’s not the only thing that matters.  Credit cards are considered “revolving debt,” which means your payments vary depending on your outstanding balance, and any unpaid debt “revolves” to the next billing cycle.  Credit reporting agencies also want to see that you have a responsible history of non-revolving, or “installment” debt, which is a long-term debt with fixed monthly payments – like a car loan or a mortgage.  The more of a mix you have, the higher your credit score is likely to be.
  1. Not using your credit cards at all. You probably know that closing a paid off credit card is a major credit score no-no – but you might not know that simply keeping your card open may not be enough. Credit reporting agencies want to see responsible credit use – which isn’t the same thing as zero use. What’s more, if your account is inactive for too long, your credit card company might close your account for inactivity.  A closed account will drag down your pool of available credit and your debt-to-income ratio, which in turn will hurt your credit score.
  1. Paying “zombie debt.” Paying a very old debt might seem like the responsible thing to do, but in some cases it can do more harm than good. Depending on the age of the debt, paying even a small amount can have some unintended negative consequences that can hurt your credit score. Unfortunately, there are some shady third-party companies making a living trying to scare people into paying their long-dead debts.  For a more in-depth discussion about zombie debt, check out this post.

Problems with credit card debt?  Looking for ways to build or rebuild your credit or tips for improving your credit score?  If you need debt advice or have questions about spending, saving, budgeting, or credit cards, you can always reach out to Debt Guru.   Contact the Debt Guru team today for a free debt consultation.

Mike Peterson

Mike is the author of “Reality Millionaire: Proven Tips to Retire Rich” and he has been published in a variety of local and national publications including Entrepreneur Magazine, Deseret Morning News, LDS Living Magazine, and Physicians Money Digest. He holds a B.S. in business administration from the University of Phoenix.