Your credit score is undeniably important. It determines how much interest you pay on loans or lines of credit—or if you can borrow the funds in the first place. Understandably, it’s to your advantage to keep tabs on your score.
How can you do that? Start by learning what can hurt your credit rating and what can’t. The range that most lenders consider acceptable is between 600 and 800, so let’s take a look at the truth about keeping the score within that range.
Let’s start with common problems that can hurt your credit. It is common sense to pay your bills on time, especially since even one missed or late payment can affect your credit rating. This is true even if the lender doesn’t turn the account over to a collection agency. Paying your bills on time and paying at least the minimum is the best thing you can do to protect your credit; it counts for an impressive 35% of your score.
Unfortunately, the joint credit card balance that your ex is responsible for according to the divorce decree can hurt your credit. Lenders generally will continue to send both parties bills and late notices until the person no longer responsible for the debt is taken off the account. The best advice is to work with lenders before the parties actually split. Make sure they know who is responsible for what debts after the divorce is granted.
Multiple loan requests in a short period of time might cause your credit score to drop, at least until the agencies see that you have the ability to pay the additional bills. For example, if you apply for a car loan, two new credit cards, and a home equity loan over the course of several months, the credit agencies might sit up and take notice. There won’t be a problem if you got a promotion and your income went up too, but if you don’t have any additional income to cover all the payments, the agencies may view that as a red flag.
There are also some common myths about what can lower a credit score. One of the most harmful is that you can hurt your credit score by checking it frequently. This is the only way to correct errors on your report, so make sure to check your score on a regular basis. Consumer Reports suggests you check on a staggered basis from each of the three major credit agencies, say every four months. You are entitled to three free inquiries each year from each of the agencies, so take advantage of this service. You can request the reports at annualcreditreport.com.
Although some people worry that unpaid traffic tickets or library fines can hurt their credit, this is simply not true. These types of tickets and fines do nothing to hurt your credit score, mainly because municipalities seldom turn these balances over to collection agencies. According to Consumer Reports, credit reporting agencies do not collect this type of information anyway.
There is disagreement among experts about the effect of liens and other judgments on your credit score. It is true that the information on liens is often public record and contains personal identifying information (like social security numbers) that is difficult to match with the information already on file with the credit agencies. According to Consumer Reports, tax liens were removed from credit reporting agencies over a year ago, but negative information about unpaid judgments does remain on your credit report for seven years from the time of the first delinquency.
MoneyCrashers disagrees, stating that property liens will hurt your credit, at least until that information is deleted from your credit report. And that could take up to 10 years. They suggest asking the credit agencies to remove this information, especially if the liens were not imposed by the state or federal government. There is no guarantee that they will comply, but it is worth asking.
There is plenty of information—and misinformation—out there about what affects your credit score. By learning the truth and staying vigilant, you can keep your credit score as high as possible for years to come.
Sources:
https://www.consumerreports.org/credit-scores-reports/credit-score-myths-what-hurts-you-what-doesnt/
https://www.consumerreports.org/banking-credit/what-is-a-good-credit-score/
https://www.moneycrashers.com/what-hurts-affects-your-credit-score-factors/
