You may already know some of the basics of maintaining a healthy credit score: pay your bills on time, don’t charge the maximum allowed on your credit card and start building a credit history early.
But as much as you focus on good credit habits, some things that may be less obvious can hurt your score. Forget to pay a parking ticket? Use a debit card to rent a car? These and other missteps can ding your score, experts say.
“They are not as common, but they are something to be aware of,” says Jonathan Roisman, a credit expert at NextAdvisor.com, an independent consumer research website.
Here’s a rundown of some common mistakes.
Unpaid parking tickets. A parking ticket alone won’t hurt your credit score.
If the fine goes unpaid, however, and is eventually sent to a collection agency, the effect on your score can be detrimental.
“Something going to collections is one of the worst things that can happen and will have one of the largest impacts on a person’s FICO score,” says Anthony Sprauve, senior consumer credit specialist at FICO. The FICO score is one of the most common credit scores that lenders use and ranges from 300 (the lowest rating) to 850 (the highest).
Not all municipalities will send unpaid parking tickets to collections, but in recent years, some cities have started doing so, including Chicago, New York City and Washington.
The good news is that today the FICO score does not consider debts in collections that total $100 or less. “Those are considered nuisance collections,” Sprauve says, and may include some parking tickets, as well as other small bills, such as library fines.
But any amount over $100 is taken into account, and the black mark remains on your credit report for up to seven years.
Even if you pay the bill after it has gone to collections, the blemish will not be erased from your report.
“It will show lenders that you made good on the debt, which helps,” Sprauve says. “But it doesn’t go away.” (Over time, the impact on your score will lessen, though, because the FICO rating system gives more weight to recent credit behavior.)
Opening new lines of credit. When you apply for a new credit card or loan, lenders will make what’s known as a “hard inquiry” on your credit report (a hard inquiry is when a lender reviews your credit report).
These inquiries can have a slightly negative effect on your score — much less than a bill that’s sent to collections — but you still want to be cautious about applying for more credit than you need.
“What the score looks for is if someone is opening a lot of new credit in a short amount of time,” Sprauve says. “Those inquiries could be an indication you’re a higher risk for debt repayment.”
Certain exceptions are made if, say, you’re applying for a mortgage or auto loan. The FICO score recognizes you may be rate shopping and will not penalize you.
But other inquiries will count against you. Be sure to know when inquiries are made too.
Rental car agencies, for example, will review your report when you rent a car with a debit card.
Closing a credit card. Finally, while you don’t want to open too many lines of credit, you also don’t want to hastily close old accounts.
The length of your credit history makes up 15 percent of your score.
An additional 30 percent of the score is determined by how much of your available credit you’re using.
If you close an old credit card, you could hurt your rating by both shortening your credit history and raising your ratio of debt to available credit.