Keeping a good credit score is essential, since merchant account providers, utility companies, and landlords will look at it before you can sign any contract. Unfortunately, there are many things that can negatively affect one’s credit score, and some of them are rather surprising. Let’s look at some of them.
Missing payments is obviously the easiest way to get you reported to the credit bureaus and to have your credit score lowered. This includes loan payments, rent or lease payments, and medical bills.
However, missing even small payments of any kind could ultimately bring down your credit rating. Unpaid parking and speeding tickets are especially dangerous because city and state governments can easily report them to the credit bureaus as debts. Even an unpaid $5 library fine might turn into trouble. Local libraries have started to send unpaid fines to collection agencies, and when this happens, your missed payment will appear on your credit report. Definitely not worth it!
Also, make sure that you always pay your taxes on time. Not paying taxes might easily result in a tax lien being placed on your assets. A tax lien has a devastating effect on your credit score, which can plummet by 100 points or more. Unfortunately, a tax lien can remain on your report for up to 15 years.
It makes sense to close old credit cards you aren’t using anymore, right? Not always. Each of your credit cards contributes to your available amount of credit. By closing a credit card, your credit utilization will increase, and remember that the lower your credit utilization, the higher your credit score. Additionally, closing your oldest credit cards will shorten your credit history. Since companies prefer borrowers with a longer credit history, shortening your credit history will result in a lower credit score.
Utility accounts usually don’t have a strong impact on credits scores unless you miss a payment or habitually pay late. The utility company can turn unpaid amounts to collection agencies, which will report the debts to the credit bureaus. A common mistake is forgetting to settle your final payments when you move. It’s easy for a bill to slip through the cracks, so check your account online or call the company to make sure you don’t have any outstanding payments.
Simple actions such as applying for a cell phone contract, internet connection, or cable TV service can temporarily lower your credit score. Following your application, utility providers will most likely check your score before you can sign a contract. The issue arises when the company runs a hard credit check instead of a soft one. A hard credit inquiry looks as though you are applying for credit, which temporarily pulls your credit score down. It’s a good practice to ask the provider for a soft inquiry.
A low credit score may be an issue when trying to open a merchant account. However, there are solutions. If this is your case, consider opening a high-risk merchant account, which will meet your needs without the higher credit score requirements of a regular merchant account.