Transunion is one of the three consumer reporting agencies (CRA’s) which are responsible for keeping a record of your credit profile. Today I came across a brief and helpful article on their “Credit Education” section that I’d like to share with you and attach my comments to. The article is titled “Your Credit History: Five Surprising Things That May Impact Your Score.” Let’s analyze these 5 surprising things, one by one.
(Before reading on, you can review the basics of credit reports and scores to become familiar with some technical terms)
1. City Fines and Parking Tickets
“Whether you forgot to return your copy of The Grapes of Wrath or to pay a minor parking ticket a few years back, these small infractions could eventually add up and show up on your credit history. Cities and other municipalities can send even small fines to collections, so make sure that you pay up on time and clear out small amounts so they don’t turn into a big deal.”
This is all true. Do not ever forget to pay fines and tickets unless you really want to ruin your credit profile. If you don’t pay and the fines are sent to collections, the fines will become collection accounts and are reported under the “Potentially Negative Information” section on your credit report
2. Unsettled Accounts
“Changing service providers can be a pain, but in your rush to get it over with, don’t forget to settle up your accounts. Some providers, be they gas, cable, electric, satellite or any number of other services, keep accounts on file when they aren’t closed out properly. Make sure that when you make the switch, your account is caught up and you’ve requested the account be closed, otherwise the account might become inactive or delinquent.”
A friend of mine forgot to close his utility account when moving to a new apartment. He got a delinquency record on his credit report as a result. I understand that moving is a stressful process, but please, do yourself a favor and do not forget to pay off and close out all accounts that you do not plan to carry over to your new place.
Let me add a 2.5 point: unpaid bills. Any unpaid bills: medical bills, utility bills, college fines, you name it – they can all go to collections and damage your credit profile for 7 years.
3. Closed or Inactive Credit
“It only makes sense: When you’re done with a credit card, you close it out, right? Not necessarily. Closing an unused or inactive credit card could reflect as less available credit on your credit history, which is usually seen as a negative. Instead, keep unused credit cards open and use them for small purchases that you pay off immediately.”
Closing any credit account will lower the amount of credit available and hence increase uitilization ratio, resulting in a lower credit score – assuming you carry balances, which you should not in general. In addition, closing an old credit account will eventually reduce the average age of accounts when the closed account stops being reported, usually several years after closing. In general, don’t close a credit account unless for the reasons I mentioned in this post: Closing a credit card: Let’s get the facts straight
4. Back Taxes
“They say that the only thing you can count on in life is death and taxes, but you’d better add “bad credit” to the list if you neglect to pay what you owe Uncle Sam. The IRS takes a hard line with back taxes and could even put a lien on your home or garnish your wages to get what they’re due. This shows up on your credit score, so make sure you’re all caught up or at least using a payment plan to settle.”
This point should really be grouped with the first. Seriously, don’t ever owe money to the government. Owing money to a utility company is bad enough.
5. Hard Inquiries
“Most people know that excessive hard inquiries to check credit can negatively impact credit scores, but you might not even realize who runs a hard inquiry. While a credit check for credit cards, loans or a mortgage is expected, you might not realize that opening a new cable account, getting a new cellphone, renting a car, or requesting a credit limit increase can all result in hard inquiries as well. Make sure that they’re only done when absolutely necessary to avoid dragging down your score.”
In my personal experience, Comcast will pull a hard inquiry on you, while AT&T will not. I cannot tell for other utility companies. However, I do know that these hard inquiries, though they are visible on your credit report, do not affect your FICO credit score. So you have nothing to worry about. On the other hand, requesting a credit limit increase will most often result in a hard inquiry; one well-known exception is American Express.
Be aware that some banks and credit unions will pull a hard inquiry on you when you open a checking account with them. This is really odd, but it has happened to me. Digital Credit Union is the one I had the issue with. Perhaps credit unions will pull hard inquiries but regular banks will not, but don’t take my word for that.
So what do we take from this informative article by Transunion? First of all, do not owe money and forget or refuse to pay it back. Secondly, don’t close a credit account unless necessary. And last but not least, be careful with credit limit requests, but don’t worry about inquiries from utility companies.
Most of the information and advice from these CRA’s is accurate and helpful. I suggest you visit the “Credit Education” sections of their sites to learn more about credit. The other two CRA’s are Experian and Equifax. The Credit Education sites are:
But as I have pointed out in the section on utility companies’ inquiries, they sometimes provide not totally accurate information. I will keep an eye on their articles and alert you if I find any other issue.