3 Things that affect your Credit Score that will shock you!

If you don't pay your bills you don't expect a very good credit rating.  That is obvious.  But what if I were to tell you about the hidden things that you get rated on.  I have people sit in front of me quite often who think they have perfect credit only to hit the floor when I tell them otherwise. Here are the three most common things I see.

1) Going over your limit - if your credit card has a limit of $1,000 because you have decided you never want more access to credit then that amount and you, in a pinch, need to put something on your credit card that takes you over your limit something happens.  You've been a good client and the bank allows the overage so you think "I must be okay".  Well you want to watch out for this one.  Once you go over half your limit your credit score changes.  The credit bureau does not differentiate between a limit of $1,000 and a limit of $10,000.  It only knows you are maxing out your available credit.  Your contract may also be affected.  Some credit cards have built in penalties for going over your limit.  Over the limit automatically rates as an R2 on your bureau.  It may also trigger some interest charges even if you pay it off by the due date.  Over the limit can also apply to once the interest is added on.  Let's say your line of credit or credit card limit is $5,000 and you have drawn down to the max.  At month end the lender will send you a statement that shows your $5,000 balance and then they add on the interest you owe them and viola, you are over your limit.  I see this one a lot especially on Home Owner Credit Lines.  Once over the limit your interest can be affected and I've seen them jump by as much as 19%.

2) Trusting Someone Else to Pay a Bill in Your Name.  You have an internet, cable, hydro bill in your name and you are sharing living space with other people who share the expense.  Suddenly you graduate or whatever and you take off for Thailand and leave the final payment in charge of someone else in the house.  When you come home and want to buy a car you might be surprised to find out your credit rating sucks because you have a collection.  I recently had a young girl in my office who's roommates swore up and down they paid the final cable bill.  After investigating she found out they did indeed pay the bill but they didn't return the cable box and so she was billed, bill not paid because everyone had moved and so the bill went to Collection.

3) Permission for Bad Behavior.   All too often I tell someone they have missed a payment or they've been late on a payment only to hear them tell me they phoned the lender and made arrangements to pay late or skip the payment in question.  The person "you spoke to" could be just about anybody in the bank.  Perhaps you called after hours and the cleaner picked up the line.  Okay that's a joke but seriously.  The minute we hear it's okay we breath a sigh of relief and go on our merry way.  Whenever you make an arrangement with a lender make sure you ask how it will affect your credit rating.  Get everything they say in writing.  Better yet - don't ever do it.

That's my three tips for today.  Over the next little while I will give you some other tid bits of info about your credit score.  You may want to subscribe to this blog so you don't miss a thing.

As always, your comments and questions are always welcome.