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Other Things That Hurt Your Credit

Credit scoring can be so temperamental and difficult to understand. So often we think we are doing the right things to boost our credit scores, but when go to apply for a loan or credit card, we see that the credit scoring formula doesn't agree. It can be very frustrating trying to figure out all of the fine details of what to and what not to do. If you feel that you are being proactive in improving your credit, but still can't seem to be in the healthy range, here are some things you may be overlooking.

Balance transfers

You may be enticed to transfer your credit card balances from high interest rate accounts to lower ones to save in finance charges. But doing so could negatively affect your credit.

Same thing goes for consolidating your debt. The reason your score takes a hit has to do with credit utilization ratio; how much of your available credit are you using. The credit scoring formula likes to see a big space between your balances and available limits. If all of your debt is one card, your balance will be closer to the limit, which negatively affects your score.

If you have already opened a new account, keep it open. That available limit has now been calculated into the score, and closing it will reduce your total available credit which, again, negatively affects your credit utilization ratio. Just spread the debt out among your accounts, striving to keep all balances under 30% of their available limits.

If, however, you aren't desperate to raise your credit score; meaning you aren't in the market for a major loan or anything, go ahead and transfer your balances. Use the lower interest rate to pay down your outstanding debt. But keep in mind, it takes several months to see noticeable changes in your credit report. So if your situation changes to where you will be needing financing, get your credit utilization ratios more balanced in plenty of time.

Library or parking fines

Consumers owe an estimated $40 billion in unpaid debts such as library fines, parking tickets and traffic penalties. Local governments have been turning to private collection agencies to collect on these debts. Collection agencies typically report to the bureaus and will often add late fees or other charges to increase the outstanding balance.

Don't assume that, in time, these debts will fall away. In fact, they are only likely to get worse. In addition to the negative impact on your credit report, you'll likely incur interest charges and/or additional penalties increasing the balance. You may even get your license suspended or have a warrant out for your arrest.

And don't think moving out of state will solve the problem either. Public records follow you and will continue to complicate matters.

If you know you have a fine, pay them. Contact the library or municipality and take care of it. Don't wait for follow up notices either. All sorts of things can happen that will prevent you from receiving notice. In the meantime, your credit report is getting trashed and who knows what else that will only make life harder. If you need to dispute the fine, find out what you need to do and get it handled, the sooner the better.