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4 Shocking Things That Hurt Your Credit Score

While there are many factors that can contribute to lowering an individual’s credit score, these 4 causes may actually surprise you.

If you are currently struggling with bad credit and want to improve your score, you’ll want to know these 4 shocking things that can end up damaging your credit score – if you aren’t careful.

1) Do you only have a credit card?

Did you know that if you only have one type of credit this can hurt your credit score? The types of credit you have makeup 10% of your overall credit score, as it demonstrates your ability to manage your debts as a whole.

One way to improve your credit would be to have a diversified range of credit sources. Therefore, as you look to boost your credit score, you may want to consider adding another type of loan to your credit history. For example, if you only have a credit card you could apply for a personal loan or a car loan.

2) Do you have an inactive credit card?

If your response to this question is yes, then it is likely that this is hurting your credit score. If your credit card is in good standing, yet you have not being using it for a long period of time, your credit issuer may opt to close this account due to the inactivity.

Some credit issuers may even close inactive accounts without notifying you first. This is especially bad because closing an account will decline your credit score. This is because 30% of your credit score is made up by how much you owe versus your available credit (utilization ratio). For example, if the credit card account closed had a credit limit of $5000, this is how much your available credit will drop which will increase your utilization ratio significantly.

One way to avoid this from happening is to start using your inactive credit card for a couple purchases every month and ensure that you are paying off the balance on time. That way your credit issuer cannot close the account because it will become active again.

3) Are you wanting to close a credit card account?

Not only can closing an old account affect your utilization ratio, which makes up for 30% of your credit score, it also affects your payment history – which makes up for 35% of your credit score.

Closing a credit card account will harm the length of your credit history since creditors want to know whether you will be able to pay them back. When you apply for new credit, creditors will look at your payment history and if you close an older account you will shorten the length of your history.

4) Do you plan on using your debit card to pay for a car rental?

As it turns out renting a car with a debit card can also be one of those rather surprising instances that can hurt your credit score. While most car rental companies will require that a credit card is used to make a deposit and payment, there may be others that will instead accept payments via a debit card.

If you decide to pay with a debit card, the rental company will be able to access your credit report with a hard inquiry, to ensure that you are a reliable renter. A hard inquiry can decrease your credit score by a few points, and they remain on your credit report for up to 2 years. It is important to avoid any unnecessary hard inquiries on your credit report, therefore, you should use your credit card to pay for a rental car so that no inquiry needs to be made.

If one of your ultimate goals is to improve your credit score this New Year, then being aware of these 4 surprising factors that can negatively affect your credit score can be vital to your success.

If you also in the market for a car loan this year, you will be comforted to know that even with bad credit you can access the vehicle financing you need. At Canada Drives, we have been helping Canadians since 2010 get the vehicles and car loans the need, regardless of their credit score. It's simple, all you have to do is contact us or apply online today.

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