Home > Credit 101 > 8 Surprising Things That Affect Your Credit

Comments 48 Comments
Advertiser Disclosure

Disclaimer

How Credit Scores are DevelopedLearning 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.”

Free Credit Check & MonitoringClosing 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), you should dispute it. Disputing it won’t take it off your report automatically; the credit reporting agency will usually need to check with the source to determine whether it is accurate. While that is happening, it may be listed as “under dispute” on your credit reports. Some people have been told to dispute negative items in order to game the system and get a loan.

“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. Of course, if information is wrong you will want to get it corrected, but if you are in the process of getting a mortgage or an important loan, understand that the dispute can affect your credit scores in unexpected ways.

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

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them. Compensation is not a factor in the substantive evaluation of any product.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.



Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team