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Things You Did Not Know Could Hurt Your Credit Score

These days debt is a concern among a majority of Americans; people are constantly looking at ways to boost credit score. However, borrowers and debtors need to be aware that credit scores are not only attached to credit card spending, but most financial decisions we make in life. Also be aware of some issues that can lower credit score even more, and how to avoid them from hurting you financially.

1. Closing a credit card can be harmful. Closing a credit card does not exactly hit your credit score directly but it will lower your combined credit allowance between all you cards; then you will have a higher credit usage because collectively by getting rid of one credit card, for example, with $5,000 limit and you have $2,500 debt on a different card, you have just increased your credit usage by lower the maximum amount of credit you have (utilization ratio), by $5,000.

Ideally, a credit card user wants to have a utilization ratio no higher than 30 percent after choosing to close a credit card account.

2. Applying for new credit can hurt your credit score because applying for any form of new credit requires a thorough inquiry on your credit report. Running too many inquiries on your credit report can lead to a lower credit score, which is harmful when looking to buy a home or other large investments that require loans. It is beneficial to only apply for credit when, and if it is needed.

3. Renting a car with a debit card, if permitted by car rental service. This is because sometimes credit agencies check your debit card history if you are not using a credit card, which can been see as a red flag to agencies that you are a high risk to them, and are not trustworthy. By the agencies checking your credit report that will be seen as a hard inquiry and lower your credit report some points.

4. Financing large purchases can make you seem like more of a risk to credit agencies. They will do an inquiry on your credit report because financing big purchases, such as, electronics and furniture, look like a "last resort" to credit agencies. These inquires, like we stated before, are a huge hindrances to credit scores.

5. Not paying parking tickets. This one seems silly, but states are cracking down and sending unpaid tickets to collection agencies. Having a unpaid parking ticket in your name on a agency's collection can hurt your credit score drastically. Having a low credit score because you did not pay a parking ticket can get you higher interest on loans in the future.

Make sure you do not have any unpaid bills or expenses because they can all add to lowering credit scores and preventing you from making investments in the long run.

Work cited:

5 Things You Won't Believe Hurt Your Credit Score (The Huffington Post) By: Johnathan Roisman http://www.huffingtonpost.com/nextadvisorcom/5-things-you-wont-believe_b_5607286.html?utm_hp_ref=mostpopular,credit-cards

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