Monthly Archives: September 2012

You worked hard to get a decent credit score. Then one day you apply for a car loan and are denied. What?!? Why ?!?

I have always been a big proponent of regularly checking your credit report for this very reason. One late payment and WHAMO! An incorrect debt “accidently” reported on you credit report and POW! Perhaps an old medical debt you forgot about and BLAM! Okay fine…you get the idea. (Besides, I ran out of batman fight scene tags)

While most of us are aware that your credit can be affected by late payments, missed payments, repossessions, batman references, foreclosures and the like, most people are not aware of the little, weird things that can negatively impact your credit.

Having credit, but not using it. Sounds strange but it’s true. Too much open credit is a bad thing. The rule of thumb is to carry a balance of 15-30% of the credit line. This will show that you can use credit and use it wisely. The opposite can be true as well. If you consistantly carry 90-100% balance of your credit line, this can be interpreted as risky credit behaviour and lower your credit rating.

Closing an account. Okay, so you have a credit card with no balance and you don’t want to put a balance on it just to improve your score, as I mentioned before, so you close the account. KAPOW!…..(okay fine, I’ll stop) your credit rating falls as a result. Why? With the credit card comes positive reporting, even if just a little. Your history is reported indefinitely as long as the account is open. But if you close the account, or the bank closes it for you, the account is deleted from your credit report 7-10 years later. So, keep it and use it, keep it and don’t use it or close it altogether? Honestly, I don’t know. I think the better option is to prevent yourself from getting into this catch 22 in the first place. Don’t over apply for credit and get credit that you don’t need. Which brings me to the next point….

Don’t apply for credit that you don’t need or want. How many times have you gone to a baseball game or county fair and seen the booth the promises a free gift if you apply for their credit card. Your first response is… “Wow…I could really use another back-scratcher” or “What a nice tee-shirt” so you apply for the credit card and walk away proudly carrying your new Capital One Beer Cozy. Be aware! Every time you apply for credit, something called a “hard inquiry” is put on your credit report. This will lower your credit score. Not by a lot, but if you have a closet full of Juniper Bank key chains and Bank One golf ball buddies, then you may want to double check your score before you continue with the “free gift” applications.

Rent a car only when you absolutely need to. Someone once told me that they will occasionally rent a car just to give their car a break from use and mileage. I wasn’t sure that made a lot of sense, but it makes even less sense when you find out that renting a car can affect your credit. What’s that? You heard right. When you rent a car, most rental companies will actually do a “hard inquiry” on your credit before they let you drive away with their car. This usually happens when you are using a debit card for the payment. So ask the rental agent before you sign whether or not they are planning on destroying your credit rating over the 10 year old Ford Beater that you are about to rent.

Late library books. What a thing it must be to finally finish your copy of “Twilight”, only to discover that it is two months overdue at the library. A real double whammy of dissapointment. But to add to your frustration, now a collection agency has started sending you a bill. Rats! Now you have involved your credit report. Make sure that you renturn your books on time. Not doing so, could cost you.

Divorce. Divorce is bad enough. Most people going through a divorce, are not necessarily thinking about their credit reports. More often than not, a person will forget that they are on their ex’s credit card account. If the ex stops paying the account, or exceeds the credit limit, it will affect you. Divorce is a nasty thing, but during the process, run your credit report, verify your debts and take your name off of any community credit card. Remember however, that although you may have taken your name off the account, it only absolves you of future purchases. You will still be liable for the balance prior to your removal. And while the divorce court may order your ex to pay the credit card, the credit card company will not recognize this. As far as they are concerned, you are both still liable. If your ex flakes on the payments, you will have to take him or her back to family law court. Yuck !!!!!

Don’t dispute the debt unless it’s a valid dispute. Every time you dispute a debt with your credit report it becomes a part of your report and will affect your credit. Obviously, if the debt is not yours, it must be disputed. But, do not dispute a debt simply in an attempt to remove it from your credit report. It is a common thought that if you dispute a debt and the creditor misses the deadline to respond, then the debt will be removed from your report. This is considered “cleaning” your credit report. And while the concept is not completely invalid, it is very unlikely that the creditor will not respond and then you have made a bad situation worse by attempting to dispute a valid debt. Review your credit report often and dispute the truly invalid debts. But don’t send in a thousand disputes hoping the creditor may miss a deadline. It just won’t happen.

We live in a credit society. Almost anything we do can affect our credit. So be careful. Unless you live “off the grid”, it is important to maintain your credit. And unless credit card companies are offering free Batman Bobble Heads, I would plan on staying away from all those credit card offers.

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