Consumer Comeback Blog

10 Surprising Factors That Affect Your Credit Score

Written by Jeffrey Trull

drop-affect-your-creditscoreIf you take your credit score seriously, you’re probably well aware that late payments and high balances can hurt your score. But you might be surprised how your credit can be affected by other seemingly-harmless cases.

Watch out for these sneaky ways your credit score can drop when you least expect it.

1. Inactive credit card accounts

While you might avoid closing old accounts to avoid a credit hit, keeping inactive cards open might not be a solution.

After some period of inactivity, credit card companies may stop reporting your account to credit bureaus. This can affect your credit utilization rate and result in a lower credit score.

If your card is inactive for a long time, the issuer may decide to close the account, which can also affect utilization along with credit age.

If your card’s been filed away, use it every now and then to keep it active.

2. Unexpected hard inquiries

When you’re applying for a new credit card or loan, it’s not surprising when a hard inquiry shows up on your credit report. But there are other situations in which this can happen that you might not expect, especially when there’s no actual loan involved.

“Hard” inquiries can be used to calculate your credit score, and having too many in a short period can lower your score.

If you rent a car with a debit card, the rental company may check your credit score, possibly resulting in a hard inquiry. Dollar car rental explains on their site how they use credit checks for debit card users.

Other situations that may involve a hard inquiry include subscribing to cable, signing a new cell phone contract, and even opening a bank account.

For more, Credit Karma breaks down several more cases of “soft” vs. “hard” credit inquiries to watch out for.

3. Unpaid library and parking fines

If you think you’ve put unpaid fines behind you, you may be in for a surprise.

Libraries can sell uncollected fines to collection agencies. Once this happens, the fines can show up on your credit report.

Unpaid parking tickets can be reported to credit bureaus by local governments. If they can’t collect from you, they might pass on the debt to collection agencies, too.

4. Financing through a merchant

Some stores will let you finance purchases simply by applying in the store. While it may seem that the retailer itself is your creditor, these merchants actually use other lenders to finance your purchase. As a result, this other financing company will show up on your credit report, and your score can be lowered. also points out that these financing cases often include stagnant debt and another inquiry, which won’t do your score any favors, either.

Considering skipping the in-store financing and pay with cash or credit instead.

5. Paying an old debt

If you think you’re doing yourself a favor by paying off old debt, you might actually be harming your score.

Don’t bring zombie debt back to life. Making even a partial payment on debt that’s years old can reset the date of last activity. Not only will the debt be collectible again but the debt will be updated on your credit report, too.

Be careful when contacted about old debt, and understand the applicable laws before taking action. Making payments could make the calls stop, but might not help your credit.

6. Back taxes

If you owe back taxes to the IRS, that may show up on your credit report. The IRS can place a lien if you’ve failed to pay taxes, and this public record can find it’s way onto your credit report.

Liens stay on your credit report indefinitely until paid off. While active, a tax lien could cause a score to drop by 200 points.

Avoid having a tax lien filed against you for taxes owed by reaching a payment agreement with the IRS, which won’t show up on your credit report.

7. Divorce

Divorce doesn’t cut financial ties with your spouse as cleanly as you imagine.

Court judgements aside, you may still share joint debt, like a home mortgage. Even if your spouse gets the house, your credit may still tied to the loan if you co-signed.

As with any time you co-sign for a loan, your credit depends on how reliably your co-signer makes payments. If they’re late or stop paying, expect your credit score to drop.

8. Settling debt

If you can’t pay off all your debt, you might be able to reach a settlement with your creditors. While this might seem like a victory, the debt will show up as “settled” on your credit report, which isn’t a good thing. Your credit score will almost definitely take a hit.

Be cautious and understand how debt is reported when you pay less than the outstanding balance.

9. Lack of credit diversity

You may think that you’re golden by having several credit cards in good standing. But if you lack other types of loans on your credit report, you might have a lower score.

Credit mix makes up about 10% of the average FICO score. If you’re shooting for perfect credit, a mix of different types beyond just credit cards is probably necessary.

While taking on more debt to increase your mix of loans to improve your credit score might not be worth it, you might have to live with a lower credit score until there’s a reason to take out a loan.

10. Late or missed rent payments

If you rent instead of owning a home, you may think you’ve steered clear of any potential credit issues by avoiding a mortgage. Not true.

Landlords can report late or missed rent payments to creditors. They can also ask a debt collection agency to attempt to recover any missed payments, which can also land your rental payment history on your credit report.

Before you skip rent payments, realize they can affect your credit score and your ability to find a new place to live.