If you’re smart, however, you’ll look toward the future and choose not to indulge your every whim. You’ll also take proactive steps for getting and maintaining a good credit store and increasing your financial stability. However, there are some sneaky little monsters that are good at messing up the credit you’ve worked so hard for and, if you’re not aware of them, they could end up hurting you without you even realizing it. Now is the time to step up and educate yourself on hidden risks to your financial stability.
There comes a time in most people’s lives when they will have to rent a car. Whether their own car is in the shop or a different vehicle is needed for a long trip, car rental is a convenient and simple way to get on the road quickly. If you do rent a car, however, you’ll want to put that rental on your credit card. Believe it or not, using a debit card when you rent a vehicle can negatively impact your credit score! When you use that debit card, the rental company goes right on in and checks out your current credit rating. Once they’ve inquired about you, it’s not at all uncommon for your credit score to then drop significantly!
Another thing that can hinder your credit is having a store credit card. A lot of people, especially young people, tell themselves this is a good way to start building credit without having all of the responsibilities and expenses of a “real” credit card. Plus, they will get discounts when they shop! The truth of the matter is, however, that these cards simply aren’t worth it. Not only do they come with through-the-roof interest rates, but simply applying for them makes your credit score drop.
Something else that can be bad news for your credit is to secure financing through a company, rather than going directly through a bank or using a credit card. If you, for example, hire an outside company to finance your car or buy furniture with in-house financing, you could hurt your credit. When it comes to your rating, there are “good” types of debt and “bad” types of debt. Smart, “good” debt includes necessary things like college loans, while “bad” debt includes things like financing for non-necessary items.
It’s also a bad idea when you have a credit card company that doesn’t report your card balances and other pertinent information. This can happen for a variety of reasons, but it spells trouble for you no matter what. Your credit utilization rate can’t be calculated correctly and can lead to confusion and poor credit. It’s always best to ask your credit card company directly about reporting and, if it’s not reporting, to request that it start doing so right away.
Are you ready for a shocker? Here goes: never taking out a loan in your life can hurt your credit! It would make sense that having never needed to borrow money would make you look good and financially responsible. However, that’s not how the credit companies look at it. In their eyes, people become credible by taking out loans and then paying them back. If you’ve never had one in the first place, then you have nothing to show for yourself. That might seem unfair, but it’s simply the way things work. You can remedy it by taking out smart loans and paying them back in a timely manner.
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