5 Things You May Not Know That Can Hurt Your Credit Score

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Filed under: Credit Issues

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We all know how important credit and credit scores are in today’s financial world.  We also know that if we don’t pay our bills on time, these delinquencies can be reported to the credit bureaus and damage our credit score.

However, many people are unaware that these less obvious situations can also have a negative impact on credit scoring and could affect the ability to obtain home financing (or make the cost of the financing more expensive).

Closing an Old Credit Card

You know the one…  That credit card in your wallet that you’ve had for years but you seldom use.  Yep, that one!  It contains a long history of well-managed credit.  You may not use it very much, but when you do you always make the payments on time.  The credit bureaus love that card because it shows how responsible you are with credit.  If you cancel it, you’ll also cancel all of that great history and your scores could go down.

Opening a New Credit Card

That department store credit card that you are offered along with an enticing discount by the merchant might help you save 10-20% on your purchase that day, but it might also knock your credit score down a bit.  If you pay the bill on time or even better, early, then your score will recover.  However, it’s never a good idea to open up a new credit card when you’re in the market to buy or refinance a home in the near future.

Never Using Credit Cards

Here’s one many people don’t realize, and I’ve mentioned this before.  If you think that you are being financially prudent by never using credit cards, you might be right.  Unfortunately, the credit bureaus like to see credit cards being used responsibly. This means using them every month and then paying them off as soon as possible.  Keep your balances low, when possible, and always try to pay more than just the minimum.  This shows the credit bureaus that you know how to manage credit and it helps your scores.

Failing to Pay Medical Bills or Student Loans

Medical bills and student loans are two of the most popular types of debt that people will neglect.  Doing this, however, will very often result in collections or other negative data being reported to the credit bureaus and make it extremely difficult for you to obtain mortgage financing.  The best course of action here is to contact the creditor and see if you can negotiate the payments if you are having trouble paying the bill.  Do whatever you can to avoid that collection process.

If you have any questions regarding these or other mortgage related issues, just let me know.  I’d be happy to answer your questions and even provide you with a referral to a professional that can help you.

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