So you probably know missing or being late on a credit card payment can negatively impact your credit score. But do you know what else might be lowering your credit score?
“Clearly not Cleo, I clicked on this article…”
Ok we’ll tell you 🍷
And we think you’ll be surprised too that some of your go-to companies are super shady about their credit reporting practices.
…Oh the joys of doing things you didn't know were bad for you.
But when you eventually get in a position where you need good credit, you’ll be pissed at yourself for not taking it seriously sooner. So good on you for doing the right thing.
Now here’s a list of things that can negatively impact your credit that you might not know about.
1️⃣ Missing a Klarna payment
Everyone has a love/hate relationship with Klarna.
We love being able to spread out the cost of an item over time. We hate how easy it is to rack up hundreds of dollars worth of payments that you might not be able to afford.
Klarna loves to advertise that they do not impact your credit. It’s even on the front page of their website. But when you do a bit of digging, you’ll find that Klarna does in fact report missed or late payments to the credit bureaus and could employ a debt collection agency against you.
We wrote a blog about Klarna’s shady business, so we’ll leave it at that and let you read all about it here.
2️⃣ Applying for multiple credit cards at once
It might be tempting to apply to numerous credit card companies all at once, but this is a big no no.
See every time you apply for a new card, the credit company pulls a hard credit report to see your credit history and credit score. They do this to determine if you’re trustworthy enough to give a credit card to.
But too many hard credit checks to see if you're trustworthy apparently make you look untrustworthy to the credit bureaus…
Makes so much sense.
3️⃣ Withholding rent or utilities
Having apartment problems? Is it your messy roommate or is it your nosey landlord that's making your life hell?
Whether you can’t afford rent anymore or you’re trying to stick it to your landlord, unpaid rent or utilities can be reported to debt collection agencies, who more often than not report that to the credit bureaus.
Our best piece of advice for getting out of your lease is to read your contract harder than you've ever read before. And then pay the termination fee.
Think of it this way… take your pick: 7 years of bad credit or a very unfortunate fee.
Neither are great… but the latter doesn’t affect your future renting opportunities.
4️⃣ Closing a credit card
It’s so tempting to close a credit card that's paid off. But unless your credit score can afford to take the hit… don’t 🛍️
A big part of credit is your debt to credit utilization ratio. It’s basically how much of your money you use vs. are allowed to use.
A good credit utilization ratio is 30%.
What’s that mean? Say your credit card limit is $2,000, you’ll only want to use about 30% of that or $600.
Like why give me the limit if you don't like when I use it…
So what does this have to do with closing a credit card?
When you close a credit card you’re impacting your debt to credit utilization ratio, which impacts your credit score.
You’d also be impacting your credit variation and credit history (both also key factor in credit).
See the credit bureaus like when you have a mix of different types of credit accounts on your report. They also like a longer credit history. So if you close one of your good credit cards it could affect your score.
It makes no sense to us either. Shouldn’t we be rewarded for not needing that card anymore… HELLO!!!!
We should say the one exception here is if your card has a big ol annual fee. Instead of paying it for nothing, give the card issuer a call and see if you can switch to a no-fee version.
This keeps your credit history intact, but gets rid of the fee.
5️⃣ Unpaid parking tickets
There is absolutely nothing worse than being tight on money, coming out to your car (that you parked in the same spot you always park in)... and what’s that on your windshield?
A bright-ass stupid piece of yellow paper.
So you shove the ticket in your center console cause you’re pissed and you were just trying to get your Chipotle.
And then you forget.
And then because the world is such a forgiving place. Your missed payment goes to a debt collection agency and subsequently the credit bureaus.
6️⃣ missing a Phone plan payment
Most of us do not have a spare $1,000 lying around to fund a new phone, so we turn to payment plans.
We spread the cost of the phone over 24 months plus get locked into a data contract. What can go wrong?
Well, phone plans are not unlike the rest. If you miss or are late on a payment your credit score may be taken a hit for it.
7️⃣ Unpaid medical bills
Those damn doctors…
Ok, No. We’re not mad at the life-saving doctors. We’re mad at the institution ✊
Medical bills are already such a head and heartache. Could they not just cut us a break and not ruin our credit on top of our livelihoods.
Sadly unpaid medical bills can be reported to the credit bureaus.
It’s honestly just rude.
✅ Count on Cleo
Don’t feel bad if you’ve done one or more of these things on this list. We promise it's more common than not.
If it has happened though and you’re looking for some ways to potentially build your score - then check out our Cleo Builder subscription.
It’s got everything you need to get you living your best credit life.
And just one more reason why people think Cleo’s one of the best money apps out there right now.