If you’re like me, you forget things. A lot of things. Thankfully, I have sticky notes to get me through life, although sometimes even they can’t help me remember everything. I’m talking about things like paying rent, my car payment and utilities. If it seems ridiculous that I have a hard time remembering to pay the same bills every month, it is, but that’s a different conversation. This conversation has more to do with the consequences of forgetting to pay bills on time, among other things that could impact your credit score.
Say your rent is due the first of every month, with a grace period until the fourth. You forget and pay it two days late. No big deal, right? Depending on your landlord, that isn’t necessarily true. In fact, landlords can pay to report your payment history to the credit bureaus. This is typically unlikely, although property management companies have been known to take this route. Your best bet? Pay your rent on time and don’t take the risk.
I’ve received a parking ticket (or handfuls of parking tickets) in my lifetime. If you think all you have to worry about is paying the ticket, that’s not always true. Unpaid parking tickets and even library fines can go to collections, which hurts your credit score. The collections agency can report your outstanding amount to the credit bureaus. Parking tickets and other fines are bad enough. Don’t make your problems worse by not paying them off in a timely manner.
Do you know what the number one reason for bankruptcy is in the U.S. today? If you guessed unpaid medical debt, you’d be right. What’s worse, if you have a large amount of medical debt and have to file for bankruptcy, the damage can last upwards of a decade.
Applying for Credit
Every time you apply for a line of credit, your credit report is pulled. While an occasional hard pull won’t set you back too far, a large number of inquiries over an extended period of time show the lender that you’re desperate for credit. Keep in mind that inquiries within the same 14-day period appear as one inquiry, so try and compare options within that time period to limit the damage.
As tempted as you may be by a 0% interest financing plan, you may be better off avoiding it. That’s right, I’m telling you that even if you have the option of 0% financing on a new 60” TV, it may be in your best interest to pass it up. Why? Any time you finance a purchase, you open up a line of credit for that exact amount. When you make payments, you maximize that line of credit, which increases your debt utilization ratio. These loans are often looked at as “loans of last resort,” which we’ll get into soon.
“Loans of Last Resort”
Life happens. For example, your car breaks down and requires a costly repair, or you need a large chunk of change for a home repair. If you’re low on cash, you take out a payday loan to help you pay for what you need. These loans are frowned upon by other lenders and could lower your credit score.
As you can see, there’s a lot to watch out for when it comes to hurting your credit score. What other types of problems have you run into that negatively impacted your credit score? Let us know in the comments below!
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