Your credit score impacts many areas of your life. You probably know that your credit score impacts your access to credit and the price you pay for that credit. But, many people don’t realize that credit scores can also impact things like the amount of the deposit you’re asked to pay when you connect utilities, your access to apartments, and even the price of your car insurance.
In short, your credit score matters—whether you’re planning to apply for credit or not.
Unfortunately, many people are unclear on the many factors that influence credit scores. While most realize that delinquent credit accounts and debts going to collection have a negative impact, other factors are often overlooked.
Lesser-Known Factors Impacting Credit Scores
- Accounts you may not consider relevant to your credit can have an impact. For example, some utility companies and even landlords report to credit, and unexpected debts such as unpaid library fines may be passed to collection agencies, creating a collections item on your credit report.
- Credit applications can knock down your credit score. Although credit reporting agencies may cluster credit inquiries (for example, if you apply for five different car loans within a short period of time, those inquiries may be bundled and impact your credit score less than applications for five different types of credit).
- Using too much of your available credit can have a significant negative impact on your credit score. A person carrying $2,000 in credit card debt who has a total credit limit of $3,000 is viewed very differently from a person carrying $2,000 in credit card debt against a $25,000 credit limit.
- Closing out old credit accounts can hurt. Though many people think that closing accounts is a good way to gain control over credit utilization, closing older accounts can backfire in two ways. The first is by reducing the overall available credit, creating the problem described in # 3 above. The second is that length of credit history is a factor in determining your credit score, so taking your oldest accounts out of the mix can have a negative impact.
- Inaccuracies on your credit report are a much more significant problem than most people imagine—about one in four U.S. credit reports contains at least one error or misrepresentation. When you fail to identify and address these items, they impact your credit score just as a valid item would.
Increasing your understanding of the factors that impact your credit score is the first step toward better control over that high-impact number. However, knowledge is just the first step. Maintaining your credit score also requires exercising special care with the items you know have an impact, such as ensuring that utility companies that report to credit are paid on time, even though you may have leeway in terms of a collection action from the company.
One of the most important things you can do to protect your credit score is to monitor your credit report and take action when you see errors or misrepresentations on your report. If you’ve disputed inaccurate items on your credit report and those entries have not been corrected, you may have a claim under the Fair Credit Reporting Act (FCRA). Take the next step by scheduling a free consultation right now or call (855) 413-4973.