Ways You Can Screw Up Without Messing Up Your Credit Score

Your credit can determine interest rates for loans, as well as whether or not you’ll qualify for credit in the first place. Employers also ask you to let them run credit checks on you to see if you’re reliable. So it’s in your best interests to avoid making mistakes that will ruin your credit rating.

Posting at Financial Edge, personal finance blogger Fabulously Broke puts you at ease by identifying several blunders that won’t torpedo your credit score. Here are a few of our favorites:

*Making too much or too little money. Income does not affect credit ratings.

*Late payments to utilities and phone companies. You’ll want to check with the laws and procedures in your own state, but in general utilities don’t report your payment history to credit agencies. On the other hand, if your bills go to collections, a collections agent will tattle on you.

*Checking your own credit. Credit checks from outside sources make it seem as though you may be applying for more credit, but checks of your own credit won’t draw red flags.

*Having loans with high interest rates. It’s your credit rating that affects your interest rates and not the other way around.

Check out the rest of the post at the link below for other mistakes that won’t damage your credit.

For more information about free credit reports, go to the FTC at FTC.gov/freereports
8 Slipups That Won’t Hurt Your Credit Score [Financial Edge]

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  1. ParingKnife ("That's a kniwfe.") says:

    Making too little isn’t a “mistake”. It may not be something you do on purpose, but as long as it’s an honest buck I don’t see why anyone should be made to feel bad about it.

  2. kuhjäger says:

    It still bothers me that places can use your credit score to decide if they are going to hire you.

    My sister used my SSN for all sorts of things (she even managed to get a job with the census and file taxes with it) that got me in trouble before I was even 18.

    Can’t get a security clearance, so couldn’t get a commission in the military, a job with the government, or anything in finance. I pay my actual bills, I am a respectable person, but for the next few years I am screwed.

    • ParingKnife ("That's a kniwfe.") says:

      I know. Same thing here- brother. I don’t even bother applying to financial institutions for jobs anymore. Which is stupid, since I’m probably more familiar with SWIFT codes, IBAN, and money transfer protocols than most average Americans. I used to work for a translation/interpretation company, so I’m very familiar with how business is done internationally.

      • bar_foo says:

        Call me hard-hearted, but if I were a bank manager I would probably not hire you either. If you let your brother get away with identity theft, rather than having your record cleared at the expense of harming a family member, I would consider you a potential security risk. I’m not saying its unethical to protect a sibling, just that it suggests behavior that is incompatible with the responsibilities of working in a financial institution.

    • Gulliver says:

      While I agree with the sentiment regarding using credit for a job,but I wonder did you prosecute your sister? If not, I have to say that is YOUR fault. Everything SHE did should land her in prison for identity theft.

      • ParingKnife ("That's a kniwfe.") says:

        Family. It’s called family. Some of us like and are close to the siblings we grew up with. In my case, my brother’s SSN is one digit off and he’d been making an honest mistake.

        It’s one thing to call the cops on your siblings. I don’t judge people for that. It’s another thing when you’re expected to call the cops on your siblings- that strikes me as something being wrong with the world.

        • Chaosium says:

          “It’s another thing when you’re expected to call the cops on your siblings- that strikes me as something being wrong with the world.”

          How is it the credit reporting agencies’ fault? There’s no “whoopsiedoodle” clause in identity theft.

          • ParingKnife ("That's a kniwfe.") says:

            Are you being deliberately clueless? We’re discussing whether it’s acceptable, reasonable,.or logical for companies to use credit info in employment.

          • aikoto says:

            EVERYTHING is the credit reporting COMPANY’S (not agencies) fault. If we had the right to freeze our credit reports from the beginning (in other words, OPT-IN sharing not OPT-OUT), there wouldn’t even BE an identity theft crisis.

        • Loias supports harsher punishments against corporations says:

          If this is about respecting your family, why did the sister commit fraud against her brother? Sounds like he waived her right to family protection when she screwed over one of the family members.

          It’s not his job to experience the consequences of HER decisions for her.

      • perkonkrusts says:

        Just because you don’t respond to a wrong doesn’t make that wrong your fault. If my neighbor’s kid throws a rock through my window and I don’t sue or call the police, it’s still not my fault that the neighbor’s kid did that.

        • Chaosium says:

          “Just because you don’t respond to a wrong doesn’t make that wrong your fault.”

          It makes it your financial responsibility, which is independent of “fault”.

    • Beeker26 says:

      Along the same lines it really bothers me that companies that don’t grant you credit are allowed to use your credit score against you. If you’re not offering me credit then you have no business looking at my credit report. Period.

      And if you’re going to use my credit report against me then they should be required to report your performance. Everything is completely stacked against the consumer when it comes to credit, and it’s just not right. The Fair Credit Reporting Act of 1998 isn’t fair at all, at least not to consumers.

    • BurtReynolds says:

      While your bad credit may not be your doing, you have to be able to appreciate why credit history is used for a background check for a clearance. Someone with a history of not paying their bills or that is carrying a mountain of debt is considered vulnerable to “influence” more so than a candidate who has an excellent credit history and hardly any debt.

      I mean, I hate the fact my car insurance uses my credit score in determining my rate, but that is more due to the fact they seem to have it on a feather light trigger. I applied for a new Amex card and that was enough to drop my score from an “A” to a “C” in their mind and raise my rate. “Recent inquiries” was the only thing that wasn’t an A on thier books.

    • Loias supports harsher punishments against corporations says:

      Sounds like you actually hate credit fraud…. and your sister.

      Hey, you are more than welcome to protest the items on your credit report as fraudulent. Whether you do it or not is your own responsibility. Your sister made this bed, maybe it’s time for her to lie in it.

  3. Gulliver says:

    I would not tell people that utilities do not report DTE (gas and electric) in Michigan does. I know some cell phone companies do too.

    • Extractor says:

      And it winds up showing as an Installment loan with a $0 balance thus knocking 12 pts from credit score.

  4. mac-phisto says:

    wow. i have some serious issues with this article. just be careful – some of that advice is deceiving. for example, utilities/telcos don’t have to sell your debt to a collection agent to report you to the bureaus – many of them have in-house collection departments that will report a closed account with an unpaid balance before selling it off. so, be sure to resolve accounts before you close them. & the same goes for bank overdrafts. not only can leaving an unpaid balance with a bank result in a collection account or a court action, but banks also use secondary credit bureaus to report “closures” & will report you to them as well. they’ll also report you to these secondary bureaus if you’re a “serial overdrafter” – even if you don’t owe them money, so just don’t do it. also, simply talking with a credit counselor won’t hurt you, but working out payment arrangements with them (or even your creditors directly) can. your existing tradelines may be modified to reflect that you’re using a credit counseling service to make your payments.

    & here’s a “tip” they missed (& the most useful, imo): you’re only reported “late” after 30 days, so you can still pay late & not be considered late in the eyes of the bureaus. so, paying a credit card a few days late may cost you a hefty late fee, but it won’t cost you a mortgage. as long as your accounts are paid within that 30 day window, you’re considered on-time. consider strategic late-paying if you “make too little” & need to juggle the bills occasionally. just don’t make a habit out of it – it can get awfully expensive awfully fast.

    • craptastico says:

      never pay your CC a day or two late. you’ll pay for it with higher interest rates that will never come back down. if you need to put off a bill, put off your utilities. i think that’s the point is that you’re better off putting off your electric or gas bill b/c you can pay those late without any repurcussions

  5. gman863 says:

    One blunder that CAN f**k up your credit score (at least for a month or two) is to have one or more credit cards at or close to their limits.

    I do freelance work building custom PCs. Earlier this year, I had a client order 35 PCs at one time. Although the client paid a large deposit, I prefer to use MasterCard when buying parts (a 1% cash back bonus plus the right to dispute the charges if a shipment doesn’t arrive). I pay off the card each month without interest.

    Although Chase claims my “Sapphire” card has no present spending limit, they report a limit of $25K to the credit bureaus. Although I paid the $24,800 charged to this card in one month (in full and on time), the “balance to available line of credit” red flag stayed on my report for a few months — long enough to result in the first credit request decline I’ve been hit with in almost 20 years (ironically, on a credit union issued MasterCard offering a better rewards plan).

    If you charge a lot, it looks better on your credit report if you have three different accounts at 30% of their available credit line versus one account at or near its limit.

    • Mock says:

      Another trick is to pay some of the balance off before the posting date.

      Let’s say you have a 25K credit card balance and your posting date is the 25th. If you (can) pay 20K on the 20th, the posting balance is only 5K, which is reported to the credit bureaus!

      I’ve done this and it works!

    • BurtReynolds says:

      Yeah, I think this is BS. They should at least average it out. My credit utilization could be 10% on average, but one month where it is 80 dings you? It doesn’t seem like a good indicator of risk.

  6. Extractor says:

    “You’ll want to check with the laws and procedures in your own state, but in general utilities don’t report your payment history to credit agencies.”
    And how do you get the electric utility thats classified as an installment loan removed from my report. Never been late, on autopay and it costs me 12 pts on score.

  7. aikoto says:

    1. Don’t use credit. I didn’t believe in this, but I read a book called the Total Money Makeover and now I do. I realize the idea of living on credit is foolish. Save, then buy. Why on earth would you do it any other way except for a house?

    2. Freeze your credit reports. This locks them so that just about no one can see your credit report without express permission, each time. This is NOT a fraud alert! Fraud alerts DON’T WORK. See here:

    http://www.consumersunion.org/campaigns/learn_more/003484indiv.html

    If everyone froze their credit, there wouldn’t BE identity theft (well, not credit-based ID theft anyway).

    • pecan 3.14159265 says:

      I don’t really see it as being better or worse. Cash is a tool, just like credit. If you’re responsible with it, you’ll come out ahead. I don’t see the point in carrying around a lot of cash if you can just use credit instead. Pay it off every month and you’re fine. The money in the bank is the money you’ve saved specifically for expenses. The difference is, you’re not carrying it in your wallet in the form of paper bills.

    • BurtReynolds says:

      But then I would miss out on the few hundred dollars I get in cashback from my credit cards. I pay the balance every two weeks, so I don’t pay a cent of interest but they pay me for using it. I don’t see how I lose in that situation. Don’t forget the free extended warranty Amex gives me, or the insurance for when I rent a car.

    • notserpmh says:

      “1. Don’t use credit. I didn’t believe in this, but I read a book called the Total Money Makeover and now I do. I realize the idea of living on credit is foolish. Save, then buy. Why on earth would you do it any other way except for a house?”

      In general principal, I agree. Don’t buy stuff you can’t afford/pay for. But your first statement “Don’t use credit” is in direct contradiction of your last “…except for a house?” If you are going to by a house with credit (like a vast majority do), then you need to have been using credit, for a while. I work in the real estate industry and it is really difficult to get a home loan of any significant size with no prior credit history, especially in the current market/economy. If you have 20% down, are not financing that much overall, and have a pretty good income with long history (have worked at the same place, made the same thing for at least a year or two), you might have a chance, but your interest rate and terms will still be much higher than someone who has a few credit cards that they use and pay off every month.