Unconsciously Damage Your Credit Rating

Did you know that credit cards like American Express and Capital One can actually help to damage your credit rating? If you didn’t know, you are not alone. Both financial firms and a few others refuse to give charge limits to the three major credit rating bureaus (Equifax, Experian, and Trans Union) for any reason. Instead, these companies give your typical balance owed as your credit limit. Therefore, if you have a $1,500 balance on your card, the companies tell the credit rating bureaus that your limit is $1,500. To the credit bureau, it looks as though you have maxed out your card. This subtracts points from your credit rating.

This is just one example of the many ways you can unconsciously hurt your credit rating when you think you are doing nothing wrong. Here are a few more examples.

Balance Transfers

Paying off your credit card balances by switching to one card with a lower interest rate can also hurt your score. Often, people pay off one credit card and then fail to cancel it. Instead of having one credit card, it looks as though the person now has two credit cards, and that equates to more debt. If you do opt to pay off one card, cancel it immediately. Then wait at least a year before applying for a loan. This should be enough time to alow for the cancellation to show up on your credit report.

Watch Where You Are Grouped

Your FICO credit score is also based on those who fall within your group as determined by the FICO rating system. The system pools groups of similar people together in order to come up with credit scores. If you have $25,000 in debt, for example, you are pooled into a group of similarly aged people with the same amount of debt. Your credit score can actually be adversely affected if these people do not pay their bills on time. You can argue the rating, but for the most part, you will meet with failure. It is just how the FICO system works.

Pay Those Fines

Are you aware that unpaid library fines and unpaid parking or speeding tickets now count against you on your credit rating? It’s true. Changes to the FICO system have enabled the government to add unpaid fines, speeding tickets, parking tickets, and similar charges to your credit report. If you thought moving away kept you from having to pay library fines, you are sadly mistaken. It counts against you until you pay it off.

Check your credit report yearly. Items such as the failure of Capital One or American Express to properly state limits can be successfully fought. In fact, some states have started lawsuits against the credit reporting system for penalizing customers of these companies. If you are among them, write letters to your politicians in order to get the credit rating you deserve!