Not sure why your credit score’s lower than expected? If you’re doing anything on this list, it could be the cause for your concern!
When it comes to your credit score, there are lots of factors that’ll determine how high (or low) your score is. While some, like missed or late payments and bankruptcies, are more commonly known about, there is a whole load more that often fly below the radar.
So, to avoid being tripped up by the unexpected and your credit score bearing the brunt as a result, make sure you stay on the right side of these seven surprising credit-score-damaging habits.
1. Not using your credit cards enough
This one might seem strange, after all, if you’re not using your credit card, you’re not getting into unmanageable debt, and you don’t have repayments to miss, right? But if you’ve got lines of credit available to you, lenders do actually like to see you making the most out of them.
That’s not to say you have to splash the cash needlessly to prove a point, but simply putting small, repayable amounts onto your credit card every now and then will help. If you drive a car, for example, using your plastic to fill up your tank is a sensible way to maintain manageable spending habits.
2. Unpaid parking tickets
If you don’t pay your parking ticket within the timeframe you’re given, continue to ignore any reminders or notices, and your fine gets escalated to a debt collector, it can leave a mark on your credit history, which will, in turn, compromise your credit score. So, think twice next time you consider risking a double yellow line!
3. Not needing credit
If you’ve never needed to take out a loan, overdraft, credit card or any other type of finance in the past, this can leave you with a weak credit score. This might seem unfair given lenders have no reason to think you won’t repay what you owe, but it’s the lack of track record - good or bad - that’s the problem.
Although you won’t have any negative marks to suggest you’ll make a late payment or miss one altogether, at the same time, there’s no evidence to suggest you won’t.
Similar to point one, taking out something like a credit card and regularly using it to cover small, affordable purchases, could help you combat this.
4. Cancelling credit cards
If you’ve got an old credit card you’re not using, your first thought might be to cancel it. There are pros and cons to keeping and discarding redundant credit cards, but in the world of credit scores, one con comes in the form of your credit utilisation ratio.
Your credit utilisation ratio is the amount of credit you have available to you versus how much you’re actually using. Lenders don’t want to see you at 100% (i.e. maxed out), but they equally don’t want to see you at 0% (not using any of your credit at all). The ideal ratio they’re looking for is generally 30% or below, as a rule of thumb.
So, if you cancel an old or unused credit card, you could end up decreasing the amount of credit that’s available to you and increasing the amount you’re using (without spending a single penny), which could raise your ratio and tamper with your credit score.
5. Tying the knot
Don’t call off the wedding just yet - the act of marriage alone isn’t enough to intrude on your credit score! But, if your other half has a bad credit history and you take out joint finances with them (a mortgage or joint current account, for example), their previous financial dealings will appear on your credit report which could drag your score down too.
And, of course, this isn’t just limited to a marital partner. If your finances are tied to a friend or family member who’s struggled with credit in the past, their presence on your credit report could have the same effect.
6. Asking to increase your credit limit
If you’ve got an existing credit card and ask your provider to increase your limit, this can instigate a hard inquiry which can temporarily bring your credit score down. If your request’s accepted though, the increase could benefit your credit utilisation ratio and have the opposite effect, so it’s important to only ask for a rise if you’re confident (as you can be!) that your lender will say yes.
7. Not taking a book back
You might not have thought it at the time, but an innocent trip to your local library could, in fact, land your credit score in hot water - if you don’t return what you’ve taken, that is.
As with an unpaid parking ticket, if you take out a book from the library and fail to return it full stop, although it might be unlikely, the library would be entitled to get a debt collector involved to restore their shelves. And, you guessed it, this act can show up on your credit history and lower your credit score. The moral of the story? Always return your books!
So, there are our seven surprising habits that could be causing your credit score to dip. After more credit score-related insights? Then head over to our dedicated section on it here.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.