6 Surprising Things that Can Affect Your Credit Score

December 17, 2019

6 Surprising Things that Can Affect Your Credit Score

When most people think of their credit score, they think of paying the mortgage, loans, and credit cards on time. But in today’s wireless, inter-connected world, a lot more comes into play. A computer-generated record of all financial transactions occurs and becomes available to credit agencies calculating credit scores.

Consumers can request their credit history from Equifax and TransUnion once per year. It’s a good habit to adopt. You’d be surprised at the items that turn up and can be easily resolved. Knowing how a credit score is calculated is the first step to managing credit effectively.

The following are 6 surprising things you didn’t know that affect your credit score:

  1. Co-signing for a Loan or Credit Card.

Co-signing for credit may seem like an innocent favour to help a family member or friend build their credit rating. But, as with most things, there are strings attached. First, the creditor is going to make a ‘hard inquiry’ to confirm the co-signer’s credit history. Second, it’s going to negatively impact the co-signer’s credit utilization rate. And third, late or missed payments and loan defaults will damage the co-signer’s credit score. Co-signing is a legitimate way to help a child establish credit but be aware of the downside.

  1. Applying for a Credit Limit Increase.

Asking for a credit card limit increase has the same affect as applying for a new credit card. It creates a hard inquiry by the creditor which negatively affects your credit score. If you’re going on an overseas vacation, for example, and need the extra credit cushion, by all means do it. Just be sure to pay it down when you return to reduce your credit utilization rate.

  1. Closing old Credit Accounts.

Credit longevity and unused capacity are key components of your credit score. Old department store credit cards or other accounts that are no longer used extend your credit history as well as your credit utilization rate. If there are no annual fees, then keeping open accounts will increase your credit score.

  1. Unpaid Parking Tickets

Many people are unaware that public parking tickets and fines can show up on their credit report until they apply for a loan. The lender brings it to their attention through their credit inquiry. As stated previously, take advantage of the free annual credit report and take care of these issues before applying for credit. Simply paying the municipality and asking them to remove the unpaid fines from the record typically solves the problem.

  1. Making an Expensive Purchase on your Credit Card

There’s nothing wrong with purchasing expensive items on a credit card if needed, but if you carry the balance forward it will adversely affect your credit utilization score. The ideal situation is using the credit card for convenience and paying it off before the monthly statement date.

  1. Applying for Car Loans

Many potential car buyers are unaware that applying for a loan can decrease their credit score. That’s due to ‘each’ lender making a hard inquiry on the borrower’s credit status. There is an exemption period of 2 to 4 weeks for making multiple applications and counting as ‘one’ hard inquiry. Another way to avoid multiple hard inquiries is to get pre-approved for a car loan. It’ll only become a hard inquiry when you’ve picked out the vehicle and are ready to finance it.

Paying off a car or truck loan is a great way to boost your credit score. At YourCarLoan.ca, we tap into our Canada-wide network of lenders and car dealers to get you the best possible deal on your vehicle purchase. Our pre-approval process avoids the ‘hard inquiry’ to your credit report and with nearly a 100% approval rating, we get people behind the wheel faster. Get Pre-Approved Now!

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