10 Surprising Things That Can Hurt Your Credit Rating
Closing old credit cards
Closing old, unused credit cards can shorten your credit history, which in turn harms your credit score. Should you have an old credit card that you've consistently kept in balance, do not be tempted to close it. The longer your credit history, the better.
Applying for too many credit cards at once
Banks will often inquire about your credit history before deciding to give you a credit card. Making multiple applications at once makes you seem desperate or untrustworthy, as if you're searching for credit from any source possible. Whilst this may be true, it is best to keep credit card applications to a minimum, and seeking other avenues for credit.
Not having a “mixed basket”
Think that only having one type of well-balanced credit account – whether loans or credit cards - will keep your credit rating high? Well, think again. Like with many things in life, having all your eggs in one basket is a risky venture. Even if you're the sort of person who keeps a check on their finances, if you only have one source of credit, you seem like a riskier venture than you might actually be.
Not being on the electoral roll
Being on the electoral roll is essential in order to get a credit rating, as this is the information credit rating agencies use in order to confirm your identity in order to prevent fraud. If you're not on the electoral roll, it can make it seem that you either don't exist or are starting with no credit history. Therefore, if you're planning on applying for a loan, it is essential to register yourself.
Not having a landline phone
This may seem crazy in a world that's slowly being taken over by smartphones and other such mobile devices, but not having a landline may indeed harm your credit rating, even if it's only a very slight scratch. Why? Well, to lenders, having a landline shows that you may have lived in the area for some time, have a spouse, that you have a steady income and many other things that signify “stability”.
Not keeping your contracts up-to-date
Have an old phone on contract, but it’s registered to a property you lived in several months ago? If so, update it right away, as this could harm your credit rating. Again, this is to do with the “stability” factor, but also for identity purposes for when credit rating agencies run a check on you.
Closing credit cards with a balance on them
Should you close a credit card that still has a balance on it, your credit limit drops to zero, but the balance remains. This makes it seem you've maxed-out your credit card.
Renting out a car using a debit card
Many car leasing companies have a clause in their contract stating that they have a right to ask for your credit record should you pay by debit card. This is so they can see how “safe” you're likely to be with their vehicle. Should you need to rent a car, pay with cash if at all possible. Paying the upfront deposit is likely to be far safer and cheaper in the long run.
Did the credit company report your limits?
If not, your credit report could suffer, as credit limits allow companies to calculate your credit utilisation rate (that is, the total amount of debt you're carrying around). Without a credit limit, your scores cannot be calculated, and you are then seen as a “risky” investment. This is not an unusual occurrence for those who have a no-limit credit card or those who have no credit history, even if they're thrifty with their cash flow.
Changing mobile phone companies too often
This causes hard inquiries into your credit score, and having too many hard inquiries in a short period of time is a big no-no if you want to build your credit up. This seems illogical, as you could just be playing the market and trying to find the best deal for yourself; but credit rating can sometimes be illogical on an individual, case-by-case basis, as it's often a team of actuarial scientists working on generalities rather than specifics.