We all know we're supposed to pay our bills on time and carry as little debt as possible—the two major factors that go into calculating our credit scores. Yet, there are other, smaller factors many people aren't aware of that can also have an impact on our scores.
- Failing to pay even small bills could lower your credit score.
- Too many recent applications for credit could also be a negative.
- If you have a business credit card and are the primary account holder, it can also show up on your personal credit report.
1. Small Unpaid Debts
Many people pay their mortgage, credit card, and utility bills with unflappable consistency, yet neglect smaller debts. They may feel these debts are less important or that they will just go away if ignored. But sometimes they won't. Municipalities were once known to report unpaid parking tickets and even library fines to credit bureaus, for example, although that practice has largely been curtailed. Still, other unpaid debts, however trivial they may seem, can weigh down your credit score.
2. Utility Bills
Your electricity or gas bill is not a loan, but failing to pay it can hurt your credit score. While utility companies won't normally report a customer's payment history, they will report delinquent accounts much more quickly than other companies you may do business with.
3. Too Many Recent Credit Applications
It can be tempting to sign up for new credit cards that offer an attractive bonus for your business. Banks may offer tens of thousands of points or airline miles, while retailers provide in-store discounts when you apply for their credit card. A single application may have little effect, but too many in a short time period can lower your credit score. So limit your number of applications for credit, especially if you are getting ready to shop for a home, car, or student loan, where a strong credit score could be extra important.
4. Long-Term Loan Shopping
To allow consumers to shop around for the best rates on automobile, student, and home loans, FICO will not penalize people who have multiple credit inquiries in a short period of time. Various FICO formulas discount multiple inquiries within either 14 or 45 days. However, continuing to shop around for a loan over several months will fall outside of this safe harbor and likely lower your score.
5. Business Credit Cards
Do you have a credit card for your business? If you are the primary account holder on the card, most banks will hold you personally responsible for any debts you rack up with it, as well as reporting your payment history to the credit bureaus. Late payments or unpaid debts will affect your personal credit, so be sure to use any business cards as judiciously as your personal ones.
6. Mistakes You Didn't Make
Incorrect information in your credit history can hurt your score. People with common names, for example, frequently find other people's information in their file. In other cases, typos and clerical errors result in adverse information affecting your score. This is one of the reasons consumers are encouraged to check their credit reports at least annually and dispute any mistakes they find. You can obtain free credit reports once a year from each of the three major credit bureaus through the official website, AnnualCreditReport.com.
Review your credit reports at least once a year to check for errors or missing accounts you'd like to see listed.
7. Missing Accounts
Sometimes the problem isn't what's in your credit report but what's not in it. Some of your creditors may not supply information to the credit bureaus. That could mean a lower credit score if, for example, a credit card you have a pristine record of paying off on time isn't included in your report, while another, where you've missed a payment or two, is. If you find any such accounts have been left off your report, FICO suggests you either "ask your creditors to begin reporting your credit information to credit bureaus" or "consider moving your account to a different creditor who does report regularly."