Your credit score is an important part of your financial life in terms of borrowing money as well as applying for a job and renting an apartment. The main way to reduce your credit score is to pay your bills late or not at all but there are other surprising ways that you can lower your credit score.
A hard inquiry is when a lender, credit card issuer or other financial institution requests a credit check when deciding whether or not to loan you money. Each hard inquiry can lower your credit score by a few points and remains on your credit report for two years. A soft inquiry is when a landlord or employer requests a credit check before renting an apartment to you or offering you a job. Soft inquiries do not affect your credit score.
If you are in the market for a new checking account or credit card account or loan, try to limit the number of applications you submit. Each time you make an application it may apply a hard inquiry to your credit score. Also, do not close paid off accounts.
Once you have paid off debt it may be tempting to close the accounts but if you take a lot of available credit off of your credit history it can affect your credit score. A major part of your credit score is based on the ratio of available credit and amount of money you owe on that debt. If you are close to your credit limits it can have an effect on your score.
This is one reason to be wary of low interest financing options, such as appliances and furniture stores. They may offer no or low interest payments for a period of time, but if it shows that you have a large balance of your credit being owed it can lower your credit score.
Unpaid traffic tickets may not seem like a big deal, but if they are older and have been sent to collections, it can affect your credit score. Also, if you decide to cancel a gym membership, make sure you read the fine print. If you have signed up for a certain amount of time you are responsible for that expense. If you stop your payments without finishing your obligation, they can send the remaining balance to collections.
Your credit score is an important part of your financial life and there are some surprising ways that it can be reduced that you may not have thought of.