5 Surprising Causes of Bad Credit
- DEPARTMENT STORE CARDS: This is one of the biggest things that can have a negative impact on your credit rating. It sounds like a great deal at the time. You apply for a store card and save money on your purchase but applying for a store card immediately triggers a credit query which can drop your credit score. The more you do this, the lower your score can get. This is coupled with the fact that department store credit cards often carry a much higher interest rate which puts a further strain on your household budget.
- CLOSING ZERO BALANCE CREDIT CARDS: This one is tricky. Many of us don’t know how a credit rating is calculated, but in simple terms one of the biggest things creditors look at is your “credit utilization rate”. Essentially this means how much credit do you have vs. how much you is used. For example if you have one credit card with a limit of $1000.00 and you’ve charged $900.00 on it your rate would be 90% which is not very good. If you had a second card with a zero balance on it your total credit would $2000.00 which would put your rate at less than 50%. It seems strange, but it is true. Cancelling that zero balance card could cause your credit utilization rate to spike which can lower your overall credit rating.
- FINANCING FURNITURE THROUGH THE STORE: Not all credit is equal credit. A home loan carries much more weight than an auto loan and an auto loan much more than a credit card and in-store financing. When making a purchase such as furniture, consider other options of financing other than in-store financing to make the most of your credit rating.
- UNREPORTED CREDIT LIMITS: Credit card companies will also report how much you owe but not always how much credit you have available. If this is the case, it becomes difficult to calculate your actual credit score. If you notice that your credit card companies are not reporting your total limit contact them and ask that they do.
- RENTING A CAR WITH A DEBIT CARD: Many of us only like to use credit when we have to but did you know that many car rental places have a clause that if you pay with a debit card they will run a credit check? They do. Frequent credit checks bring credit scores down so make sure you read the fine print.
Understanding the inner workings of the credit system can be exhausting but every little bit you know can help. If you are one of the many people who have had negative run ins as a result of low or no credit, we can help you get back on the track to reestablishing your credit. When you purchase a quality automobile from Auto City Credit you not only get an outstanding automobile, but peace of mind!