Four Unexpected Things That Can Hurt Your Credit Score

#1 – Failing to pay your medical bills

Most people expect credit scores to be impacted negatively if they default or miss a payment on a credit card or loan, but many don’t realize that failing to pay a medical bill could seriously hurt their credit. Half of all overdue debt on credit reports is from medical debt. When you default on medical debt, your doctor’s office or hospital will most likely turn to a debt collection agency to collect the unpaid bill. The agencies typically report that debt to the credit bureaus. If you contact the medical facility and explain your financial situation, there is a very good chance they will work with you, rather than have it reported.

#2 – Co-signing on a loan

It seems harmless, you co-sign to help a family member or friend qualify for credit. But if the primary borrower defaults on the debt, it has exactly the same negative impact to your score. Credit expert, John Ulzheimer says, “Co-signing for a loan is essentially no different than you applying for the loan yourself.”

#3 – Closing unused credit card accounts

It sounds fiscally responsible; clean up your credit report by closing old and unused credit card accounts. Don’t do it for two reasons! The first is Utilization – the ratio comprises 30% of a credit score. It is the ratio of available credit (credit limits) compared to the amount of credit used on credit cards. By closing unused credit cards, you lower the ratio, which can have a significant negative impact on your score. The second reason is Length of Credit History comprising 15% of a credit score. The longer the average of your credit history the better. It’s likely that removing your unused credit cards will lower the average credit length and lower your score.

#4 – Not using your credit cards

What, why would that hurt you? Because if you don’t use your credit cards for a period of time (usually about 6 months), the issuer of your card might decide to close the account. As discussed above, whether you close a credit card account or if the issuer of the card does, the impact is the same in lowering utilization ratios and length of credit history.

Alex Grimnes