SOURCE: Creditnet


October 16, 2014 12:45 ET

The Top 5 Things That Hurt Your Credit, Ranked by

SEATTLE, WA--(Marketwired - Oct 16, 2014) - Making sense of credit isn't always easy, particularly if you're unaware of the hidden ways it may be working against you. Credit isn't only linked to using your credit card, but it's also associated with a variety of everyday financial transactions and activities. According to online financial expert, here are the top five things that may ultimately smudge your credit rating.

1. Apply for New Credit

If you're applying for a brand new line of credit, no matter if it's for an auto loan, a mortgage, a major purchase, or a credit card, the issuer of the credit will run what's called a 'hard inquiry' regarding your report. If your credit report has numerous hard inquiries on it at the same time, it can result in severely affecting your score and possibly negatively impacting it. In fact, you should only submit a credit application if you absolutely need it.

Furthermore, it's best to only apply for credit cards that you're certain you can actually qualify for. Why? Because if you get turned down for three cards before you actually get approved for the fourth, that's a total of four hard inquiries fresh on your report, further dragging down your overall score and negatively affecting your credit.

2. Closing an Account

The actual act of closing one of your credit card accounts isn't the real issue. The problem is that it can lower your overall credit utilization ratio that accounts for nearly 30 percent of your important FICO score. If you want to close one of your accounts, be sure that your utilization ratio won't dip less than 30 percent after you close the account.

3. Ignoring a Parking Ticket

Think not paying a parking ticket is no big deal? In some cities, such as Chicago and New York, they actually send unpaid parking tickets to various collection agencies. As you probably already know, anything that ends up in a collection agency will inevitably hurt your score. Therefore, you may think you're saving some money by not paying the ticket, but down the road it could be costing you hundreds more dollars in interest fees for a new loan or line of credit. If your credit score takes a nose dive, that's more fees for you since you won't get the best terms available on a new loan, all because you never paid your parking ticket.

4. Using Your Debit Card to Rent a Car

Presuming the car rental service takes debit cards in the first place, in the end this could negatively affect your credit. Some agencies will subsequently check your credit when you use your debit card to pay for something. The car rental service may wonder why you're using your debit card instead of a credit card and want to determine if you're someone they can actually trust, and will therefore check to see if you're trustworthy. In the end, that still counts as a hard inquiry, costing you some points on your total score.

5. Major Purchase Financing

Buying a new TV or furniture piece? If the store suggests financing a big purchase like a new sofa or 55" TV, stop and reconsider first. It may be a 'last resort' kind of loan, making you appear like you're a credit risk, even though you're not.

If you must make a bigger purchase, but for whatever reason you're not going to pay it all at once, it's better to put the amount on one of your new credit cards rather than trying to get in-store financing. Several credit cards currently offer 0% Intro APR up to 18 months, meaning the loan is interest free on your major purchase for the next 18 months. This will additionally increase the credit utilization ratio because you have more credit to handle.

Overall, many people are completely unaware of how some of these seemingly simple things can have such a huge impact on their credit, which is exactly why it's so important to continuously check your report a few times throughout the year to ensure everything is in good standing order.

About Creditnet:

Creditnet is an authority credit card comparison site that offers innovative comparison tools to help users find the best credit card for their needs. In addition, the Creditnet Credit Talk Forum is a community of over 100,000 members that discuss credit cards, credit, debt, and credit repair daily.

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