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3 Sneaky Things Hurting Your Credit

When it comes to understanding your credit, it can feel as complicated as trying to solve a Rubik's cube. Frustrated by this confusion, many consumers neglect their credit, which can have a devastating impact on their financial futures.

 A Consumer Action study recently revealed that 27 percent of Americans have never checked their credit report. That's alarming, because it's estimated that a large numbers of consumers have errors on their credit reports that could damage their credit.

1. Wrong Information

The wrong personal information on your credit report could hurt your credit. This could be things like your name, your home address, where you've worked in the past or even your Social Security number. How does a wrong address hurt your credit? Your information may be mixed up with someone else's, especially if you have a common name, or are a "Jr." or "Sr." Or it could indicate identity theft -- and that could really wreak havoc with your credit. By reviewing your credit report, you'll be able to quickly see if there's any information that needs to be updated or changed.

2. High Balances Compared to Limits

Another sneaky thing that could hurt you is your credit card balances -- even those you pay in full. How can a credit card that you pay off hurt your credit? Issuers typically report your balances as of the statement closing date. But then those cards aren't due until about a month later. So in the meantime the balance on your reports may look high in comparison to your credit limits.

Generally you want the balance on each card to stay below 20 percent to 25 percent of your available credit. If you have a retail card with a small limit or a reward card that you use to pay for everything to earn lots of points, then this factor could come back to bite you.

So you need to either pay your charges off before the statement closing date or ask for a higher credit limit. Of course, a higher credit limit should not be an invitation to overspend. You won't improve your credit scores if you get in over your head with debt.

3. Outstanding or Delinquent Bills

The third sneaky thing that could hurt your credit score could be outstanding or delinquent bills. I canceled a gym membership when I moved, and it wasn't until I checked my credit report several years later that I found out the gym was marking me as being delinquent, which was hurting my credit. You'll want to check your credit report to make sure that you have no outstanding bills or any delinquent bills that you need to get addressed.

For my delinquent gym membership, I contacted its home office and explained that I had moved and their closest location was more than hours away. After that short and painless phone conversation, it removed the delinquency, and my credit was repaired.

Review your credit report and make sure you're not being marked for anything delinquent that could be damaging your credit. This could be old gym memberships like mine, credit cards or medical bills.

"I've seen numerous situations where consumers were shocked to learn that medical bills they thought their insurance had taken care of were on their credit reports as collection accounts, " warns Gerri Detweiler, director of consumer education with Credit.com. "It doesn't matter if the amount is small. Any collection account can drop your credit score 25, 50, even 75 points or more."

BETTER ALMOST ANT CREDIT RATING USING STRATEGIC CREDIT IMPROVEMENT

There are many ways that you could improve and fix your credit. Even for those who have relatively good credit there might be some mistakes and discrepancies showing on your report, which when deleted could improve your credit reting standing. High credit scores are critial for obtaining credit when you need it but they also determine the rate of interest you'll be charged. Generally, the higher your rating, the lower the interest rate you'll be charged.

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Adverse credit restoration is possible for anybody. You may believe at this time there isn't any slack or ability for contesting anything on your credit report, however this is how adverse credit restoration works: if the lender just cannot demonstrate their own adverse allegation against you,than the actual credit bureaus have zero right to continue to keep reporting that adverse claim. Bad credit repair is exactly that straightforward.

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Six items to review on your credit report, Part 3: Collection Activity.

Most of the time, if you have an account that has gone to collections or been written off as a bad debt, you know about it, according to Rhonda Bailey, credit counselor and credit report review manager for the nonprofit Credit Counseling of Arkansas.

But not always.

"There are those few instances, like an old utility bill after you've moved, [where] the collection agencey didn't find them and [the consumer] forgot about it," she says. "I see that occasionally."

If you find an item that isn't yours, you can dispute it and have it removed from your report.

If the item is yours, you have some decisions to make, Bailey says.

Can you afford to pay it?

It's a good idea to check your state's statute of limitations, which is the period of time creditors have to sue you over a debt. Your state attorney general's office can give you that time limit, she says.

Aside from that, the item can stay on your credit report for seven years. The longer it's been on your report, the less it affects your score.

Coming up in Part 4: Judgments, Liens and Bankrupcies

Six items to review on your credit report, Part 2: High debt-to-credit limit ratios.

Credit scores typically look at your debt-to-credit limit ratio or utilization in two ways:

1. They compare the balance on one revolving account to your available credit from that lender. For instance, if you have a credit card with a $1000 balance and a $5000 credit limit, this ratio would be 20%.

2. They calculate the total of all your debts on revolving accounts against your total credit lines on those same accounts. So if you have four credit cards, each with a $5000 credit line ($20,000 in credit) and you have a $100 balance on two of them and nothing on the other two ($2000 in debt), this ratio would be 10%.

"In an ideal world, you would want to have [those ratios] under 10%," says Hendricks. "But certainly you want to keep them under 40%. There's no magic number."

But if you're running up a balance of $2000 to $3000 with a card that has a $5000 limit, "that's really going to hurt your score," says Brobeck (executive director of Consumer Federation of America). "And what's worse is running up balances on several cards.

Coming up in Part 3: Collection Activity.