Pay a credit card a month late and you can count on it to hurt your credit score. But there are more obscure areas you may wonder about: What if I marry someone whose credit is much worse than mine? Could my library fine from five years ago prevent me from getting approval for a car loan? Does denial of credit hurt my score?
We asked experts from the two biggest credit rating companies to share what consumers mistakenly thinks could be damaging their credit score. Here’s what Tommy Lee, Senior Scientist at FICO, and Jeff Richardson, Marketing and Communications Manager at VantageScore, had to say:
1. Check your own credit
If someone checks your credit because you applied for a loan or a credit card, this is called a “serious investigation”. These can reduce your score by a few points, but the impact wears off after six months. When you check your own credit, it is a “stealth survey” that doesn’t hurt your score. You will see both types listed on your credit reports.
Some research suggests a link between tracking your score and improving it, so be sure to check it out. It is good credit hygiene.
2. Getting married
You can share pots and pans, but you don’t share the credit. “Each of you has your own separate credit report, and only credit obligations that you have purchased are included in that report,” says Lee. For the best or for the worst, credit records stay separate when you get married. Your marital status and your spouse’s creditworthiness do not affect your credit score.
3. Bounce a check
The overdraft charges on your account are already quite high. You also don’t have to worry about an NSF check damaging your credit score. This is because the bank account information is not on your credit report. Your credit score is calculated from the information in your credit reports. If something isn’t on your credit reports, it can’t affect your score.
4. Library or traffic fines
Previously, if these fines were remitted to a collection agency, they could report it to the credit bureaus, Equifax, Experian, and TransUnion. Debt collection hurts credit scores, and many people have learned of forgotten fines by dropping their credit scores significantly. As part of a 2015 agreement between the three credit bureaus and the New York attorney general, credit reports no longer include debts that do not arise from a contract or payment agreement. This means that jaywalking or a long forgotten library book will not hurt your credit.
5. Pay a late utility bill
Paying a credit card bill 30 days past the due date will likely put a big bruise on your credit, as most card issuers report to the credit bureaus. Utility payments, however, are not routinely reported to credit bureaus. Late payment could leave you with no service, but credit problems are unlikely if you do eventually pay.
“If you don’t pay for a long time, these accounts go to a third-party collection agency that reports it to the credit bureaus,” says Richardson.
6. Being denied credit
Your credit rating may go down a bit, but only because your credit was checked when you applied, and this happens whether your application is approved or denied. A hard credit draw – the kind that happens when you apply for credit – can lower your score by a few points, but a denial of credit won’t show on your credit report or affect it.
7. Full payment of your credit card bill
There is a persistent myth that having a small balance on your credit card is better for your credit than paying off your balance in full each month.
The part of your credit limit that you use – called “Use of credit” – affects your credit score. But there’s no benefit in paying less than 100% of your statement balance – and paying the bill in full is best for your credit.
8. Losing your job
Losing a source of income can certainly make it harder to pay your bills, but your income doesn’t directly affect your score.
However, it can make it harder to get new credit, says Lee. “Lenders can look at many factors that are not on your credit report when making a credit decision, such as your income, the length of your current job, and the type of credit you are applying for. “
Even more important than knowing what won’t hurt your credit is knowing what will help you. build credit:
Pay all bills on time; payment history has the greatest effect on credit scores.
Don’t use more than 30% of your credit limits; the use of credit has the second most important impact.
Monitor your credit reports and dispute any score reduction errors.