25 August 2016 5:25 pm / Road Trip Drivers Buy a Car Finance a Car

5 Ways You’re Self-Sabotaging Your Credit Score

Ah, debt. Giving us worry wrinkles since we discovered online shopping and mastered the art of “out of sight, out of mind” type thinking.

Having a healthy credit score is crucial to nearly every major aspect of successful adulting. While there are many ways you can lower your credit score, there are some not so obvious factors that can be a detriment and bring you bad credit. And just like bad luck, it can follow you around for 7 years.

Here a few reasons (both apparent and not apparent) as to why your spending and financial habits may be impacting your overall credit score.

1. Late Bill Payments

It’s not about paying off the whole amount of a bill; in fact, it’s amount whether or not it’s on time. Since a large proportion of your credit score is based on your payment history (a whopping 35%), it’s crucial to keep on top of a scheduled payment system. Just one late payment can drastically lower your credit score. Depending on how late, how frequently you pay late, and what your credit score is, a late payment shows creditors that you’re not reliable, and it can impact your chances of getting financial aid in the future.

2. Defaulting on a Loan

A default means being unable to make payments on any loan, line of credit, or grant in a designated time period. It’s a grim situation that no one wants to find themselves in. If creditors think you're not going to pay off your loan, credit card, or bill, they'll mark the account as closed, or show it as "default". This means your loan will get turned over to a collections agency and you'll be hearing from the credit bureau, which is never a fun party to go to. Remember: bad credit can follow you for many years. Sort of like a ghost, but not in a cool, Casper-like way. The best defense against defaulting on a loan is knowing exactly where you stand, how much time you have, and getting in contact with your loan provider.

3. Not Using Your Credit Card

We know. This doesn’t really make sense. In fact, it’s weird and doesn't make sense at all. Why would you get dinged for not using your card? But if you have a credit card and aren’t using it, and haven’t for some time, your credit issuer may close the account as a result of your inactivity, and may even do so without notifying you first. Closing or cancelling of a credit card declines your credit score significantly. So don’t put that card in your freezer thinking you're doing yourself a favour. For one, you'll forget about it (like those peas you bought when you were trying to be healthy). For another, credit cards are meant to be used. So use them! Pay some of your monthly bills or donate to an orphaned kitten shelter. Karma points galore!

4. Only Having a Credit Card

We’ll this one under “Weird”, as well. Only having a credit card is actually making up 10% of your overall credit score, which isn't enough. Your credit issuers want to see you can manage your debt as a whole, which means you need to consider adding a loan to your payment history, like a personal or car loan (good thing we specialize in that area). Showing that you can successfuly navigate and manage multiple accounts improves your credit ratings. It also means you can put "excellent multi-tasker" on your resume.


5. Unorganized Payments

This is when you need to build a time machine to go back in time and listen to your mom when she told you to clean your room. Being organized is critical when it comes to creating a budget and maintaining your finances. It helps you to keep track of how much you’re spending and lets you know exactly where all your money is going. It might mean not getting to do the usual drinks and poutine every Friday, but it’s the difference between having good and bad credit. If you’re so disorganized to the point of consistently missing bill deadlines, consider that aforementioned time machine. An alternative: money apps or setting reminders in your phone to help keep you on track.


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