Learning the rules of credit isn’t always as straightforward as you might think. Sometimes, doing something you might think would be great for your credit score can actually have an unintentional negative impact.
The first step in understanding what affects your score is to know where you stand by pulling your free credit report once annually from each of the credit bureaus from AnnualCreditReport.com. If you’d like to monitor your credit score on a monthly basis, you can also get your free Credit Report Card.
Once you know where it stand, it’s all about vigilance and keeping your eye out for the surprising things that could ding your score. Here, we rounded up some of the most unexpected things that can affect your credit.
Late Library Books
You might not think that the overdue copy of “50 Shades of Grey” that you checked out of the library would have an impact on your credit score, but that bill could be sent to a collections agency.
“Collections that can seriously hurt your score can arise from parking tickets and library fines, as much as from medical bills and credit card charge offs — with the impact to your score being similar,” says Barry Paperno, a credit industry veteran and Credit.com’s Community Director.
So, get those books back when they’re due or the librarian won’t be the only one coming after you.
[Credit Score Tool: Get your free credit score and report card from Credit.com]
Divorce
Getting divorced involves dividing your assets as well as your debts, but just because your ex takes on the mortgage payments doesn’t mean that you’re off the hook.
“The account remains on their credit report and remains their responsibility until it is paid and closed. And even then it won’t be removed from their credit history,” says Gerri Detweiler, Credit.com’s Director of Consumer Education. “Plus if your ex declares bankruptcy, creditors will come after you for balances on any joint accounts.”
Closing an account
Many people think that getting rid of a credit card that they don’t want, need or actually use is a good idea since it will show they’re not credit-dependent. However, this can be a bad idea for two important reasons.
“This can (but will not always) raise your utilization percentage, and a closed account is often purged from your credit report sooner (7-10 years) than an open one (remains indefinitely) causing you to lose all of the positive credit history associated with the account,” Paperno says.
One important note on closed accounts that might surprise you — it doesn’t matter if you close the account or if the issuer closes it, the effect on your credit score will be the same.
Just a single late payment
This isn’t like high school where the teacher might give you a slide if you turn in a homework assignment late only one time. If a credit issuer reports a late payment on your account, it will impact your credit score.
As we recently highlighted, this problem will affect those with excellent credit more negatively than those with credit that’s just fair or average.
[Related Article: How Much Will One Late Payment Hurt Your Credit Scores?]
Having credit cards, but no loans
An important component of your credit score is the diversity of accounts. This means that lenders are looking to see if you can handle both revolving and non-revolving types of credit. While having only one type of account can have a negative affect on your score, Paperno warns that it’s not worth taking out a loan just to improve this aspect of your score.
Disputing an account
If an account appears on your credit report erroneously when you do your annual credit check-up (something personal finance experts highly recommend), disputing it won’t take it off your report but it will affect your credit score. But disputes aren’t just limited to wrong accounts showing up — you can dispute an account for a variety of reasons like a late payment that you contend was paid on time. Consumers need to be aware that disputing that account could have a negative impact on your score.
“Disputed accounts do appear on credit reports, but in some cases are excluded from credit scoring, which can have the effect of raising your utilization if the disputed account(s) have lower utilization than the ones still being counted,” Paperno says.
Applying for credit (even when you aren’t rejected)
Every time you apply for a line of credit, a hard inquiry is placed on your credit file that will lower your score. Although, don’t worry about getting hit twice — once for the inquiry and once if you’re rejected.
“When you’re turned down for credit, the fact that you’ve been denied doesn’t appear anywhere on a credit report, resulting in no impact to the score — other than from the inquiry resulting from the application,” Paperno says.
Renting a car
This isn’t a universal. Renting a car will not always ding your credit score, but some rental car companies will do hard inquiries on your credit that will affect your score.
Dollar Rent a Car is one of the major brands that does this as a practice. It will do a credit inquiry when drivers ask to use a debit card to rent a car.
[Free Resource: Check your credit score and report card for free with Credit.com]
Image: Irargerich, via Flickr
Kali Geldis Kali Geldis is Credit.com's Deputy Managing Editor. She writes about a wide range of personal finance and credit topics. She previously ran MainStreet.com, the personal finance website powered by TheStreet. She has also worked for The Wall Street Journal as a Dow Jones Newspaper Fund intern and at The Huntington Herald-Dispatch as a reporter.
{ 36 comments… add a comment }
I have a debt of about 25,000 in credit cards…never was late , nevermissed a payment on none of my cards.paid my mortage on time faithfully!.now my childern took my cards a way and put me in a credit counceling.now I pay them a lump sum every month and I noticed on my statements or my e-mail reminders of my due payments they are DUE!.is it possible they make all my payments late? will I have bad credit now?…..
Yes – I did the same thing, only because I wanted to get a better interest rate when the banks went crazy raising everyones rates, and asked before I signed if I should make an additional payment – was told not to worry – unfortunately here is what happens – you pay them on the 3rd, your bills are due the 10th, they pay your creditors on the 20th –you are late – and every month you are late – in 3 months time my credit score dropped 100 points – if you can get out of this thing or make an additional payment to your creditors so that the payment the “counseling program” makes is a month ahead (sort of) do it.
Talk to the credit counseling agency about changing the credit card due dates to work better with when the payments are sent out. You may need to be the one that calls the card companies, but that would help with the credit cards reporting current each month.
I got a home equity loan with Saxon mortgage in 2006. I paid on time every month. This was a Fannie May loan. Thwy sold my loan, I kept up with my payments. They sold it again to Saxon. Saxon is not a fannie May so I’m not elegable to lower my rate which is 7.99% because I refused to agree to an adjustable rate. Then I had a hip revision surgery that make me permanantly disabled. I had a good job, and had spent the summer getting 12 hours graduate credit that put me up to $50,000 a year. I was a teacher. I was planning on retiring in 5 years, so I bought a new vehicle for the first time in my life. While waiting on SSDI determination I ran out of sick days. I was late on one credit card, and they ALL went up to 30%. I also had to pay COBRA to keep my insurance. Just for me it was $500 a month. Obama had a plan to pay 60% of it for 2 years, so I paid my credit cards until they went up to 30%. I filed chapter 7, bur exempted my house and car. My car (Toyota Financial was 0% interest) They show my account as current and in good standing. My home loan, bought by Saxon took my payments every month but shows me dismissed on Chapter 7, though I reaffirmed the debt, as I did the Toyota. I called them about this, they said they could do this because I filed bankruptcy. Also they didn’t report my payments I’d made since the bankruptcy, though I did not. Is this true? Can they do this? I think OCWEN is just a predatory lender, though my loan was sold to them. They have been a nightmare to deal with, trying to make me buy their high homeowner insurance, though I had homeowners with State farm. My agent got on the phone with them and threatened to report them to the attourney general. They fixed it fast, and It hasn’t happened again. They are snakes, and refuse to remove the chapter 7 bankruptcy. What can I do? I disputed it, but experian said I had to work it out with OCWEN. They won’t work with me. What can I do?
Read this post again and again….you will se what is wrong with America. Where to begin ….graduate
credits but can’t spell eligible….disability because of hip surgery when many work and live productive
lives after same. File bankruptcy and wonder why the mortgage company is worried. Right,
Hmmm… Unproductive smart ass spells “SEE” se. I do SEE what is wrong with America, and you are part of the problem D!ck H@$d! If you do not have anything to lend to the conversation, Shut Up!
So Alex you are saying that because she had hip surgery and is now on disability she is a pariah to society. She paid in to Social Security which entitles her to disability payments. This hip surgery is not something she planned. She filed bankruptcy for the same reason many people do because of unexpected medical problems. She was five years away from retiring which means she was a productive member of society and planning well for her future but an unexpected turn of events changed her situation. She is asking for help and all you can do is critique her letter and her life. At least she didn’t write off all her debts she actually kept the to that were probably the biggest overall.
Danita I wish I could offer you a solution but I am not an expert in finances. Hopefully someone will be able to help you.
You are a jealously, judgmental JackA$$. You have based your judgment on the assumption that this person would no longer be disabled due to a surgical revision of their hip. You have no idea as to whether the revision was a success or a partial failure. You have no idea as to the cause of the need for surgery and whether it is secondary to an ongoing condition. I say, in America, you need to keep track of your own backyard and put your judgment where the Sun no longer shines.
First mistake is voting for Obama, second mistake is thinking he will help you.
OCWEN what a horrible company have had 3 loans sold to ocwen everyone has been a nightmare
Sorry, Saxon was the Fannie May lender. OCWEN is the one that’s not. They won’t lower the rate or take off the chapter 7 off though I re-affirmed the debt with them, and have paid every month. They will not show all my payments. Sorry for the confusion. HELP!!!
Hi Danita,
Predatory companies need to be exposed. Call the Business Bureau for sure and
possibly your local news station.
You can also glean information from logging on to SuzeOrmon.com. She is
an experienced financial consultant and comes on CNBC every week (on Saturdays here).
You might be able to send her a message on twitter or facebook but you can also
send her an e-mail. You can find her books at the library or you can go to
Barnes & Noble and read them there.
The more educated you become on managing your finances, the better off you’ll be.
agree that SuseOrmon.com is a great source. agree to contact the Better Business Bureau.
have large credit card debt, have funds available now to pay off 90%, should I seek a payoff discount or forgiveness ?
I had pristine credit. Then I got laid off when the economy tanked and have only been able to make minimum payments on my credit cards. I was still on time with every payment. I was not diversified because I owned my car and had no other loans or debt. The problem came to light when I got a letter stating that one of my cards was going to lower my credit limit. Why?? Then I got other letters. When I called I was told that when the credit card company does their regular review of my accounts (they said every 6 months) they look at how much I am paying as compared to the minimum payment amount. Nevermind that I have made absolutely no new purchases. Prior to my layoff I could have charged a house. Today they have lowered all of my limits to somewhere between $500-$1000 above what I owe–and they keep lowering them as I pay on them. Today it looks like I have maxed out my credit cards when I originally owed less than 30% of my available credit. My biggest problem is that I have no health insurance because I am still looking for permanent work (I am the textbook long-term grossly underemployed that is not included in the national statistics) and have recently needed money for a sudden major medical problem. There is absolutely no help for me because it seems that I was too good with my money before my layoff–I do not qualify for any help at all. Instead of benefitting from that diligence now, I’m paying for it dearly (and not just in interest!).
Same thing happened to me. When I saw where the economy was heading I was making 55k a year but got a second job to pay off credit card debt. Then i lost my job and was only able to make mininum payments. The credit card companies lowered my limnits to $500 above my balances or closed the ones with no balances so it looked like I was barely making it. I purposely paid them off so I can be underemployed comfortablely knowing I did not have these high credit card balances. Boy was I wrong. It didn’t help my credit just gave me peace of mind. Now that I am gainfully employed again my credit is bad because of my high credit card balances. Go figure.
Me and you are riding the same vehicle. My story and yours almost mirror one another when it comes to handling credit. I, too, handled my revolving credit with great care, as much care as my standard debts, like automobiles, utillity bills, etc. Always on time or early, same on credit cards, and always paying far above minimum payments. I kept a clean good and strong 780-810 score. I could buy anything on any of my credit cards (but I didnt, got really low rates on straight loans) Then, inevitably, I ran out of work. Right before the economy tanked, I had bought a new truck, for my work, and then had met a lady whom I eventually “married”. Resigned my position at my company, moved to a new location, with a new job. Then it all went down, seems like it all happened in a matter of three months. The “wife” I had turned up to still be married (even she didnt know, the divorce papers were “bought” off internet, guy just wanted two “wives”, Bigamy) This, and the fact she wouldnt deal with her issues with her ex husband and her child custody right, caused me to get out, quick! By this time, I had dropped my first job (fired for getting hurt on job!, of course , I sued) , so I was down to making less than half my “normal” salary, had to live out of savings, after my move had eat substantially into them also. Wound up cashing out my ira (rolled over 401k) , just to pay the bills, Gasoline had surpassed 4.00 a gallon, and I was driving 60 miles one way to work in a jacked up 4 wheel drive, or running the new truck , (if she wasnt using it), niether got good mileage, the new truck was much better (2 wheel drive standard cab mid size) , the 4 wheel drive got all of 13 mpg on the highway (with a v-6 engine, Ford Ranger, 4.0 with std 5 spd, and 3.73 gears 3″ lift with 32″ x 11.50 PRO COMP off road tires) Wound up having to sell that truck (and it was paid off), get an el cheapo mitsubishi mirage( at least it gets great mileage), which isnt worth anything, except for a good work ride. Needless to say, after all this happens , plus 3000.00 on getting away from her, then having to move back to my original home ( in my fathers place!) It has been a long, and very educating ride, to say the least. Forget about being proud of the way you handle debt. There is only ONE WAY, get rid of all you can. It will, if you come to be in my shoes, take a long while, a lot of doing without, and even still having to deal with debt to income issues. But, after that debt is gone, no more! I will never have more than one credit card, with a very low limit, and it will only be used in emergency situations ( like gas, hotel, hospital entrance, etc. ) and will be paid off asap, like that month if possible. I will never carry the unsecured debt load I have for so long. That has a name, it called living above your means. I would rather live in a shck in the woods or mountains, no steady electricity ( generator only, and only when needed) and be a “drop out” as far as this society is concerned. All I need is enough to survive on, forget the rest. I was not born to accumulate money nor things, so I will quit participating in the worldly ways of living, after all, what do I really need? Thats what I want. The rest is just foolish time consumption , not to mention , resource waste. Thank you for sharing your story, as I sometimes forget , I’m not alone in this problem.
D — would you share you story on our forum? http://forum.credit.com
Thanks…
why do they take so many points away when someone checks your credit?
i had a credit rating of 761 then dropped to 743 on one and 703 to 663on another.this is not fair. Why have a good credit score if they just take it away all at once
We must know not to borrow more than what we cannot afford to pay in the next six to twelve months or lifetime. Of course, we are told to dream big, live big and/or live as a hedonized pig? How? of course, you noticed that everytiime we get paid, things have to be paid for; such as bills, activities. Denying? I am not denying myself. After reading this article, I realized I have finanical issues and it need to be resolved as soon as possible.
We have to admit ourselves that we borrowed more than we can afford. Optimistic and rich people, bet you are looking away after the previous sentence. There is no trace of old money within my family’s history. Three years ago, I was poor with access to loans and credits. Today, I am “prospering”, but with debts, isn’t that poor too?
I agree Pinky, we are poor. No matter how much we work, the lure of having more and more does not stop. With that, comes the more and more in debt we become. It is like that song says, “More money, more problems”.
For anyone considering Credit Counseling or anyone else of that nature, DO NOT DO IT! They are there to make money off your misfortune. Why else would they do it. They cannot guarantee you anything but misery. For those who already use Credit Counselors, you must stay in communications with them and make sure they get those payments syncronized so that you are not getting dinged unnecessarily. Many do not care.
For those who are not in trouble yet but are going to, because of medical or job loss, you must be proactive. Try to work something out ahead of time. Every credit company or lender has a hardship department that can work with you. I was in the same boat, 2 heart surgeries & knee replacement within a year & had to quit my job. They all worked with me doing a combination of things like eliminating my interest rate for up to a year, lowering minimum payment, freezing your account & some did lower my limit. The key here is being PROACTIVE. When you talk to them, be kind, nice & polite, bite your tonque a bit, swallow your pride & accept you are responsible for creating too much debt. Keep detailed records on payments, debt & spending habits. Keep ALL purchases down to absolute mandatory needs only. Many can pull themselves out of their hole on their own, without bankruptcy or debt relief agencies and your credit scores will improve much quicker. Review all 3 credit score agencies & dispute anything that is not right. Everyone needs to be saving up for a rainy day, (at least 6 mo of your net income & do not blow it on wants!) Never let it get to debt collection agencies. That is when your real headaches begin! Everyone needs to quit spending & using the credit cards as a bottomless money pit. Use them to your advantage Do not cancel cards, use their rewards programs to your advantage & pay them off every month. Use them only for emergencies or only enough that you can pay them off in full every month. Selloff all your extra clutter around the house. Have a yard sale.
If you live within your means & follow them, 6 to 12 month savings for emergencies, you should never get in these situations. Massive medical overload is the only exception. You must treat that savings as mandatory with as high of importance as making your mortgage or car payment. Sell them boats, waverunners, extra cars,(you may have to be a one car family for awhile), motorcycles & any other toys or wants BEFORE you get into trouble. Declaring bankruptcy is an escape from your responsibilities & reality. Everyone else pays for all the irresponsible people in this world. As I said before, massive medical bills would be the exception. You do not have to have the latest smart phone, ipad, computer, TV etc. Do you see where I am coming from? Those are wants, not needs. Food, clothes, shelter, health, education & transportation are needs and many of you need to get real & get rid of your big, gas guzzling tanks for vehicles like the Hummers, Suburbans, Expeditions, full size pickups, etc or any vehicle that is obvious over kill or gas guzzlers. There is so much you can do to help yourselves if you just sit down understand the difference between wants & needs. My god, how did we live 20, 30, 50 yrs ago without having all the stuff we have now. 2, 3 4 TV’s. Every game imaginable for your kids or yourselves & who knows what else. Loaners & credit card companies are like the hangman’s noose. They give you all the rope you want until you hang yourselves. A majority of you are responsible for getting yourselves into these messes, then blaming the economy or someone else for your problems. SPEND WITHIN YOUR MEANS! If you decide it is more important to go party or eat out at an expensive restaurant than put that $50-100 in your savings, then that is where the problem lies.
hi , i have a bill with a coll , how do i bargain with them too low the bill so i can pay the acct off , the bal is 900 , any ideas ?
hi robert i like the way how you explain in every situation, THUMBS UP FOR YOU! keep up the good job.
i am 67 yo.
when young had debt.
learned my leason.
if you don;t have the cash don’t buy it.
my top salary was $550,000 per year.
my house was worth $120,000 on a good day.
i saved a lot of money.
my biggest problem now is the number of people i must support
who do not save for the future.
if you pay people with a check from the government, why work?
i am old enough that i should be dead, before the usa goes down.
Have an insurance broker that finds the best insurance rates for my cars and home
insurance yearly. Noticed on my credit report many of the insurance companies
are listed when checking my credit. Does these inquiries count toward credit
scores?
Hey there, You have done an incredible job.
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How long should one late payment remain on your credit report? As I review my report, I continue to see one late payment from 2002, I intent to dispute this.
The problem with credit scores is that the credit companies control them and determine what’s good and what’s bad based on what’s good or bad for the credit companies. Why is it bad to not have any loans and to pay everything with cash? Doesn’t that mean you’re living within your means? It’s only bad because the credit companies aren’t making any money off of it. The other problem with credit scores is that now EVERYONE looks at them, from prospective employers to rental car companies to satellite T.V providers. So if they look at them and having people look at them lowers your credit score then it’ll be hard to keep a good credit score.
Well folks all I can say is welcome to the real world. I was born poor and never been able to get ahead. Wifes Dr. bills I did ok but then I got hurt Ins co. didnt have to pay. got screwed out of workers comp. havent been able to hold a job. since about to loose my home and no place to go.Ive allways paid bill until I got hurt afterwards I was offered credit cards when I couldnt afford them . All IO know to do now is wait own the LORD GOD
Good call Gary. Just pray about it… Seems to work out for all those cancer patients, so why not you?
Its all favored towards big business and making it difficult to have higher scores. Because big business want people to have lower scores so they can make more money off them! Im sure congress has passed laws favorable to big business too, because they get paid from big business to do that.
people, i’m a 50 yr. concrete mason. through the years of ups and downs I have taken a lot of shortcuts. I have not produced a lot of savings, and resolved to myself that I am going to be working up to and quite possibly past the date of my death. but I am going to let you in on a little secret…if you don’t owe ( owe =own ) get it! they can’t tell you how to live. granted you may have to wait on that new truck or car to keep up with the jones’s. but really if you look around the jones’s are trying to sell their vehicles right now. live within your means…back in the day, if you don’t have the cash, don’t get it. maybe they didn’t have a whole lot back then, but then they didn’t have a whole lot of debt either. remember if they (Big Business) don’t have control, they cannot dictate! Big Business might have put us in this recession, but we gave them the power to do so. Please! lets take the power back…For our kids sake…just saying
Paid off my mortgage. Have one student load that is current – never late. One credit card which is also never late. My credit score went down by 20 points. Credit bureau reports I have more than one past due payment in the last 60 days. Does paying off my mortgage equal a late payment ???? I live within my means. Don’t max out said credit card. Now you go figure this one out.
Paying off your mortgage may actually lower your score, even though its a good move. Closed lines of credit = lower credit line = lower score. If you utilize more than 30% of your credit limit on the card that you don’t “max out”, that can lower your score as well. As far as the accounts being listed as being late, you were either late or there is an error on your report. Either pull your report to find and dispute the error, or don’t burry your head in the sand and catch back up on the payment.