Surprising Things That Hurt Your Credit Score

If you are having a hard time with bad credit and want to improve your credit score, you’ll want to know these 4 surprising things that can end up sabotaging your credit situation– if you aren’t careful.

1. Do you only own a credit card?
   Are you aware that if you only have one type of credit this can hit your credit score? The types of credit you have account for 10% of your actual credit situation, as it shows your ability to manage your debts as a whole.
   One way to accentuate your credit would be to have a diversified range of credit sources. Therefore, as you look to boost your credit score, you may want to consider adding another type of loan to your credit history. For example, if you only have a credit card you could apply for a car loan.
2. Is there an inactive credit card?
   If your answer to this question is yes, then it is likely that this is hurting your credit score. If your credit card stands tall, yet you have not being using it for a long period of time, your credit issuer may choose to close this account due to the inactivity.

   
   
   
   

   Some credit issuers may even shut inactive accounts without you first. This is specifically bad because closing an account will decline your credit score. This is because 30% of your credit score is made up by how much you owe versus your available credit (utilization ratio). For example, if the credit card account closed had a credit limit of $5000, this is how much your available credit will drop which will increase your utilization ratio significantly.

   One way to prevent this from happening is to commence using your inactive credit card for a couple purchases every month and ensure that you are paying off the balance on time. That way your credit issuer cannot close the account because it will become active again.

3. Are you wanting to close a credit card account?
   Not only can winding up an old account affect your utilization ratio, which makes up for 30% of your credit score, it also impacts your payment history – which makes up for 35% of your credit score.

   Closing a credit card account will affect the length of your credit history since creditors want to know whether you will be able to pay them back. When you apply for new credit, creditors will look at your payment history and if you close an older account you will shorten the length of your history.

4. Do you to use your debit card to pay for a car rental?
   As it appears renting a car with a debit card can also be one of those rather startling instances that can hurt your credit score. While most car rental companies will require that a credit card is used to make a deposit and payment, there may be others that will instead accept payments via a debit card.

   If you decide to pay with a debit card, the rental company will be able to access your credit report with a hard inquiry, to ensure that you are a reliable renter. A hard inquiry can decrease your credit score by a few points, and they remain on your credit report for up to 2 years. It is vital to avoid any unnecessary hard inquiries on your credit report, hence, you should use your credit card to pay for a rental car so that no inquiry needs to be made.

If one of your end goals is to improve your credit score this New Year, then being aware of these 4 surprising factors that can negatively influence your credit score can be important to your success.

If you also in the market for a car loan this year, you will be comforted to learn that even with bad credit you can access the vehicle financing you need. At Canada Auto Experts, we have been helping Canadians obtain the vehicles and car loans they need, regardless of their credit score. It’s easy, all you have to do is call us at 1-855-550-5565 or apply online today.