Surprising Things That Can Affect Your Credit Score
Having a good credit score makes your financial life easier. You are more likely to be approved for vital home and car loans, as well as credit cards or bank loans should you need them It allows you to more flexibly manage your finances and live your best life. when you apply for credit! You can get a free soft credit check with ClearScore.
Hopefully, you are managing your finances well, and you have a good credit score, but if that is not exactly the case, you might be surprised by some of the things that can lead to a poor credit rating, including the following:
Paying your bills late
One of the most common causes of a less than impressive credit score is paying your utilities late or not paying them at all. A lot of people don’t realize that everyday bills are included in calculating your credit score, thinking that only things like loans and credit cards are taken into consideration, but that is not the case, and if you fall really behind with your utility bills, the company could charge off your account or send it to debt collection, and that would obviously show up on your credit file. Not only that, but your payment history is a huge factor in your FICO Score, and if you don’t pay your bills on time, you will be downrated.
Asking for an increase in credit limit
This seems like a pretty normal thing to do, so you might not expect that it could affect your credit score, but unfortunately, that is not the case.
When you request an increase in your credit limit, the creditor will conduct a check on you, which is similar to the kinds of checks they would have carried out when you applied for credit in the first place, just to see whether you are eligible for the rise. Often, this will result in a hard inquiry being added to your credit report. If you have just one hard inquiry, it’s unlikely to be a problem, but if you have a bunch of them in a short space of time, it will soon have an effect. Some sources say that it will actually knock 5 points off your FICO score for every hard inquiry recorded, so be careful how and when you apply for credit!
Criminal records
This is one thing that shocks a lot of people, but if you have a criminal record, many credit companies are allowed to access theta information when you make an application. Not only are they more likely to turn you down when you apply with a criminal record, but it will also leave a hard inquiry on your file which will make it harder again to get credit in the future. That is why if you have been accused of an offense like fraud or accused of assault and battery, that you are totally innocent of, you will need to make sure that you fight the charge as fiercely as possible because not only will it affect your immediate future, but it could affect your finances for the rest of your life.
Having business credit cards
Business credit cards are often the ideals solution for new entrepreneurs looking to keep the cash flowing, but if you have one or more, it could be affecting your personal credit score.
Why? Because the vast majority of lenders require a personal guarantee when an individual applies for a business account, which means you will personally be liable for the costs racked up by your company on the business credit card, should the business be unable to pay its debts. As you can imagine, this increases your debt burden significantly, which may reduce your own credit score and access to personal credit. So, be very careful to weigh up your options before you apply for a business credit card.
Leasing a car
Leasing a car is a perfectly normal, everyday thing to do, so you might be shocked to see it here, but the fact of the matter is, many leasing companies will report the fact you’ve taken out a lease to the credit companies. If this happens, your credit score could be affected, particularly if you do not keep up with payments, which is why choosing a car lease you can easily afford is probably a better idea than stretching yourself, Of course, if you can pay cash, that would be even better, financially speaking, for you, and your credit score.
Not having much credit
It’s weird, but if you don’t have much credit, or you do not have a lot of different types of credit, it could lead to you having a poor credit score. This is because creditors like to know not only that you can manage credit effectively, but that you are able to manage a wide range of credit, from credit cards to loans, effectively. If you can’t show that, you are more likely to have a lower score and more likely to be turned down for credit, which can be a catch-22!
Mistakes
Yes, credit companies can make mistakes, and sometimes they can be costly. It’s not unusual for the wrong person’s information to be added to another person;’s credit file, and this can be disastrous. That’s why you should be regularly checking your credit file so you can put right any wrongs and ensure you don’t end up being held responsible for other people’s debts.
Cosigning a loan
Cosigning a loan might seem like a nice thing to do to help your friends and family financially but it could impact your credit score and make it harder for you to access the credit you need because cosigned loans represent a big risk, and you will be held responsible if the person you signed for defaults. So. think very carefully before you agree to cosign any loans for anyone.
Did any of these surprise you? Most people are surprised by at least a couple of them, but now you know, you can start to make even better financial choices going forward.
