10 Really Surprising Things That Can Hurt Your Credit Score

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Most people know the typical credit no-nos:

Don’t make a late payment. Don’t allow an account to go into collections. Avoid tax liens, bankruptcies and foreclosures.

And of course, paying off credit card debt should be one of your top financial priorities. (To find out your other top financial priorities, use this simple tool.)

But there are also lesser-known ways you could unintentionally damage your credit score.

Here are ten actions—from least to most harmful—that could make your number take a plunge.

10. Renting a Car With a Debit Card

While many rental agencies require that you pay your deposit with a credit card, some will accept your debit card instead. However, agencies typically have a clause in the contract stating that they can pull your credit report if you choose to pay with a debit card. That credit check causes a hard inquiry, which can ding your score a few points.

A hard inquiry is when a lender, credit card issuer or other financial institution requests a credit check in order to decide whether or not to extend a line of credit to you, such as a credit card or home loan. Each hard inquiry usually drops your credit score by a few points and will remain on your credit report for two years. The other kind of inquiry, soft inquiries, are made by people who don’t intend to take action, such as your landlord checking your credit, and won’t have any effect on your credit score.

9. Requesting a Credit Limit Increase

While it could be a good idea to ask for a limit increase on your credit card (and might help your credit score in the long run), it could also damage your score in the short-term if it initiates a hard credit inquiry. When calling to request a limit increase, make sure to ask first if it will initiate a hard or soft inquiry on your credit report. Each institution handles it differently.

Credit Card8. Applying for an Account at a Credit Union

With lots of people moving their money from big banks to smaller credit unions, it’s important to know that opening that new account could cause a hard inquiry. Before applying, ask whether or not opening a new account will involve a hard inquiry into your credit report. The inquiry isn’t unique to credit unions—most institutions conduct a hard inquiry when you open a new account.

(For more on whether moving to a credit union could be a good move for you, read this.)

7. Getting a New Cell Phone

Opening a new mobile account could also initiate a hard credit inquiry. Although each hard inquiry shouldn’t drop your score too drastically, you’ll want to be careful not to initiate too many in too short a time, or else these little actions can really add up.

6. Using a Business Credit Card

It used to be that business credit card activities didn’t show up on your credit report, but that’s no longer true. These days, all major credit card issuers require that you provide a “personal guarantee” when applying for a business credit card. That means you’ll essentially be a co-signer with your company on the card. Your company may be responsible for paying the balance, but your credit will take a hit if you fail to keep up with the paperwork or they default on a payment. If you work for a small, young business and need a business card for work expenses, first ask if you’ll have to provide a personal guarantee. If the answer is yes, you may instead want to use your own credit for business expenses and fill out expense forms.

5. Not Using Your Credit Cards

If you have a credit card account in good standing that has zero activity over a long period of time, your credit card issuer could choose to close your account due to inactivity. If you’re not using it, you may not notice that your account has been closed until your credit takes a hit. The reason this would hurt your score is that it would be bad for your credit utilization ratio. For more on what that is and why it matters, check this out.

4. Disputing a Credit Card Bill

If you’re in the midst of a credit dispute, some credit score algorithms may not take the disputed credit line into account when calculating your score, so a credit check done on your profile during that time could cause your score to be lower than it would be if the disputed account were included. Why? Again, by lowering your total “available” credit line, your credit utilization ratio would change, and not for the better.

3. Using a Finance Plan for a Major Purchase

A small, local furniture retailer may offer to let you finance a purchase … but if you accept the loan, it can hurt your credit because it’s considered a “last-resort” loan, which may make you look like a higher credit risk. Additionally, your credit could suffer from the high balance being reported on your credit.

For instance, say you apply for credit to finance a $1,400 couch. You get a great offer: no payments and 0% interest for 18 months. You take a few months to start making payments, and in the interim you have a new line of credit on your credit report. The new line will essentially be maxed out, because the limit will be $1,400 and your balance will be $1,400. Your credit utilization rate, therefore, would be negatively affected.

2. Closing an Old Credit Card Account

It may seem like a good idea to get rid of an old credit card, but it can decrease the length of your credit history and increase your credit utilization rate, both of which can lower your credit score. In particular, we generally suggest you avoid closing your oldest credit card, since that long credit history is an asset you’ll want to hang on to.

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1. Sitting on Unpaid Parking Tickets

Some jurisdictions turn over unpaid parking tickets to collections agencies. Having an account in collections severely decreases your credit score. More and more municipalities have been sending unpaid parking ticket information to collection agencies recently, in an effort to close budget gaps.

This year, Chicago and the suburbs of Washington, D.C. have started pursuing unpaid tickets this way. New York City, which has nearly $700 million in overdue parking fines, does this, too. To find out if your city gives unpaid tickets to collections agencies, search on its .gov homepage or call the Department of Revenue. Keep in mind that this includes parking tickets you may have incurred as an out-of-state visitor!

The Bottom Line

These rules governing your credit change from time to time. Something that didn’t affect your credit several years ago could now factor into your profile due to recent government legislation. Keep up-to-date on which actions can have negative credit impacts by monitoring your credit score at CreditKarma.com.

Credit Karma is a completely free credit management service that provides free credit scores, financial education, and personalized savings recommendations. We help more than 3 million consumers realize the everyday cost savings of having a good credit score.

More From LearnVest:

Getting your credit report is easy (and free!). Here’s how.
Is holiday spending putting your credit score at risk?
Not all plans are good ones: Learn from the mistakes of these failed entrepreneurs.

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LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc. that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Unless specifically identified as such, the people interviewed in this piece are neither clients, employees nor affiliates of LearnVest Planning Services, and the views expressed are their own. LearnVest Planning Services and any third parties listed in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.

  • janet

    I have real problems with the fact that some of these can affect your credit score, and hence what you pay for insurance, for example, since that is largely based on credit scores these days. 
    #4 Maybe you have a legitimate complaint. Is it better to just shut up to not hurt your credit score? 
    #5 I’m not working full-time these days so don’t use several of my cards. Isn’t that more responsible than spending money I don’t have and know I won’t be able to pay back any time soon? 
    #3 Maybe I can get 0% financing by purchasing furniture with store credit – I’ve done this several times and paid it off before the end. Doesn’t that make more sense than paying interest to a credit card company?
    A lot of your points seem slanted toward what’s best for the credit card companies, not what’s best for the consumer. Why are we allowing them to run our lives?

    • http://mischievouskitty.blogspot.com Stephanie

      I’m not the author so I can’t promise my interpretation is correct, but I think the point of the article is to let you know that these are things to bear in mind, especially if you are about to try to get approved for, say, a car loan or a mortgage.  These aren’t things that do irreparable harm to your credit score, but they do have a short-term impact that could affect your the interest rate the lender gives you, or even your ability to get a loan at all.  So if you’re about to apply for a mortgage, it’s probably not a good idea to take out a line of credit with a furniture store.  If you know you won’t be applying for a big, important loan in the near future and your credit score can take that temporary hit, then of course it makes sense to take advantage of a 0% financing offer.

      And regarding not using your cards at all – you could always treat them as debit cards.  Use them to pay everyday expenses such as gas or groceries, but pay it off in full each month, or even once a week.  Then you’re preventing the card(s) from going inactive, but not spending money you don’t have either.  Bonus: if they offer rewards you could actually end up with MORE money by getting gift cards or cash back. (But of course, only do this if you have faith in your ability to accurately track your spending and pay off each bill before you ending up having to pay interest.)

      • janet

        You’re probably right on all your points. I just get really tired of the power that credit card companies have over our lives, the fact that we have to constantly think about what will or won’t affect our credit scores. I’ve had credit card debt in the past – now paid off – and am quite happy to not use credit now. Then again, I already have a mortgage and drive an old car, so my credit score isn’t as important to me as it once was.

  • http://twitter.com/sagemoney Saundra Davis

    I am a big fan of LearnVest (recommend in all of my workshops and trainings) but I have to say that # 8 (applying for a credit card at the credit union) is very misleading.  I know you go on to say that this is true for all NEW credit applications, this is in stark contrast to the wording on #2.  
    If someone were to read the headings without the detail (as we KNOW many people do) this could be misleading and create confusion about credit union accounts. Causes me to wonder about the motivation as I REALLY hope this service remains a trusted and unbiased resource.  

    • http://twitter.com/bhardeman Bethy Hardeman

      You’re right; it could be misleading. I think the point here, though, is the timeliness. A lot of people are moving their money to credit unions right now, perhaps without thinking about how it can affect their credit. If opening an account at a credit union is right for you (as it is for many people), you should be aware of how it could affect your credit so you’re not surprised by the appearance of a new credit inquiry. That’s all.

  • Terrilee688

    I recently got a card with a dept. store to get the 10% discount.  I later realize the interest rate is at 26.99%.  Would it hurt my credit rating if I immediately pay it off and cancel it ?

    • http://mischievouskitty.blogspot.com/ Stephanie

      I’d just use it for small purchases and pay it off in full each month.  I have store cards for both Kohl’s and Best Buy for the purpose of getting discounts.  I knew full well that the interest rate would be terrible (most store credit cards are), but I also knew I wouldn’t carry a balance unless it had 0% financing (such as the laptop I bought in June – and I’m even paying that off early).  If you don’t think you have the self-discipline to keep purchases low and/or pay if off each month, I’d say your better off cutting up the card and not using it, but if you close the account it could hurt your credit utilization rate, and your score already took a little hit from the hard credit inquiry from when you opened the account.

  • Katherene

    I have a debit card and a credit card for extreme emergencies only.  I use my debit card to avoid carrying a lot of cash.  But I treat it like just I would a credit card “carefully”.  Remember cash is still king folks.  Especially during the holidays it’s so easy to overspend.  So the bottom line is we have to be smart about how we handle our money and credit cards.  I wish you all a Merry, Merry Christmas and a Happy New Year.  But really folks it takes discipline to manage your wealth.  And you’re wealth is not only your finances, but your mind, spirit and body.  That’s you’re wealth.

  • Victoria

    Some of these rules are abusive.  We should demand that our elected representatives change some of them.  When you pay OFF a credit card, it should not count against your score.  And it is highly discriminatory to have your score suffer because you’re doing business with a credit union instead of a bank.  Perhaps the credit unions will come up with some SANE standards and develop their own credit scores?  I’d like that!

  • http://twitter.com/creditscoring Greg Fisher

    Credit Karma:

    You wrote, “It may seem like a good idea to get rid of an old credit card, but it will decrease the length of your credit history and increase your credit utilization rate, both of which can lower your credit score.”

    Who told you that closing an account decreases the length of a person’s credit history?

  • http://cashadvancesus.com/ cash advance

    Well, in fact, the higher your credit score, the more detrimental a negative action can have on your credit rating. Typically, consumers with less than perfect credit history
    already have particular patterns of credit usage factored into their scores. On
    the other hand, what happens to consumers with very good credit is quite the
    opposite. The scoring model views a negative occurrence as a sign the consumer
    is heading for financial trouble because negative records on your report are
    atypical. Also, transferring your credit balances to one card may sound
    reasonable, especially if that card has rather low introductory interest rate. This
    practice can seriously hurt your credit score as carrying a high balance changes
    your credit utilization index.

  • Marly

    I just started to use CreditKarma.com and when I first registered for their site, my credit was 777. They told me in my “credit councelling” that I would benefit from opening another credit card with 0% interest for 18 months on balance transfers and I could save $4,000 over the next 3 years by doing so. I opened up the credit card, transferred some of my smaller balances onto the card leaving me with two cards with high balances and 0 balances on the other….my credit plunged to a 699! Thanks for nothing CreditKarma…douchebags :(

  • jvin

    I have a car loan that the car is not wort what I am paying the car is breaking and the company is not willing to fix it but the most important is that this loan is steadily bringing down my credit score I want to take the car back and just pay off all my other loans and bills what should O do