Whether you have stellar credit right out of college or are prepared to put together a credit repair plan after years of credit card use, you need to make sure your post-college decisions won’t negatively impact your credit score. Some simple money moves can unintentionally hurt your credit score and make it that much harder to maintain a score that makes you attractive to future lenders, employers, and financial institutions.
1. Opening a New Bank Account. If you’ve decided to switch financial institutions after school, make sure you’re prepared for a slight drop in your credit score. Many banks and even credit unions now check your credit report before granting you a checking account, and this will show up as a hard inquiry on your credit report. Weigh the pros and cons of switching banks or credit unions after college if the financial institution you are thinking of working with will perform a hard credit inquiry.
2. Ignoring Traffic Tickets. So you racked up some traffic tickets while you were in school and are now in a financial position to pay them. Your best course of action is to pay them off within a reasonable amount of time or you may find the incident shows up on your credit report. All traffic violations, including parking tickets and speeding tickets, can be reported to the credit bureaus when they hit a certain unpaid-status date. Take care of these as quickly as possible so the fines don’t even hit the collection agency.
3. Getting a New Cell Phone. A cell phone is a necessity for most, but did you know that signing up with a new cell phone provider could affect your credit score? Most cell phone providers require a credit check when signing on a new customer, so you will see a hard inquiry on your credit report. If you know you have a low score and are planning to apply for credit in the near future, hold off on signing that new cell phone agreement until you get approved for the credit line.
4. Missing Student Loan Payments. Student loans are often referred to as “good debt”—an investment in your future that will help you earn more money in the long run. But despite the positive label, missing a student loan payment is still bad for your credit score. A good way to avoid missing payments is to sign up for an automatic debit payment program with your loan provider. Not only will this save you time and stamps, but some loan providers may even lower your interest rate.
5. Canceling a Gym Membership. If you decide you can actually do without that gym membership but fail to follow the gym’s membership cancellation procedures, you could end up seeing a drop in your credit score. Most gyms list exactly what you need to do to cancel in their membership agreement, so be sure to read the fine print and follow their procedures. If you end up canceling before a certain date or stop payments from your automatic withdrawal setup, the gym could take action and report you to the credit bureau.
6. Closing Zero-Balance Credit Card Accounts. You’ve successfully paid off those larger credit balances you acquired during college and are ready to start the next chapter of your life with a clean slate. Having those open lines of credit can actually work in your favor when it comes to maintaining a good credit history, so don’t be tempted to close out those zero-balance credit card accounts. In fact, keeping those credit cards active by using them for small purchases and paying off the balance before the end of the month can even boost your credit score by a few points.
7. Applying for More Credit. Even if you have a squeaky-clean credit history, every credit card application you submit will show up as a hard inquiry on your credit report. Hard inquiries lower your score, so it’s generally a good idea to avoid applying for several credit cards or credit offers within the same month or span of a few weeks. Applying for multiple cards in a short period of time can also raise some red flags to a future lender, and may lead them to question why you seem desperate to obtain more credit.
8. Renting a Car. Not all rental car companies do this, but you may find that your rental car company runs a credit inquiry even when you use your debit card to secure the vehicle. Read the fine print of the terms and agreement paperwork carefully or just ask the rental specialist what the policy is for new customers. Remember that any type of hard inquiry—even if it’s not for more credit—will drop your credit score by a few points.
Sabah Karimi is a frequent contributor to Wise Bread (@WiseBread), a financial resource dedicated to helping young people save money. Check out Wise Bread for more useful tips like 15 ways to pay back student loans faster.