Most people are aware that late payments and collection accounts can damage the credit score. However, they may not know that something as innocent as a department store credit card can have a negative effect on their credit rating.
Several surprising actions can reduce the credit score without a person consciously doing anything negative.
Cash and credit cards are not the only ways to pay for a rental car. Some people use a debit card linked to a checking account. They do so thinking they are spending responsibly and adhering to a zero-debt policy. Though this is admirable, some car rental agencies run a credit check on those who pay with a debit card, which can lower the credit score.
Retail workers lure customers to apply for department store credit cards by offering shopping discounts. Though the percentage off may be tempting, customers may want to decline. Department store cards usually carry higher interest rates than nationally branded cards.
In addition, a credit inquiry will be placed by the retailer during the application process.
It might seem wise to close a credit card once it has a zero balance. However, closing the account can increase the credit utilization rate, which can decrease the credit score. Without placing any additional charges on a card, an individual can appear as a higher risk.
In addition, 15 percent of the FICO score is based on the length of credit history, so older accounts increase the credit rating.
If some new furniture is on the shopping list, consumers may want to take out payday loans rather than use local merchant financing. Furniture store financing is viewed as lending of the last resort and is considered revolving debt.
It is scored less favorably by credit scoring systems and too much of this alters the mix of credit in an unfavorable way.
