Sometimes It's the Little Things that Ruin Your Credit

You might be surprised to learn how some seemingly harmless things can make a mess of your personal credit—making it harder to get a small business loan. Not long ago, I came across a list of five seemingly harmless things Gerri Detweiler, Director of Consumer Education for Credit.com, suggests wreak havoc on your credit score—you might be surprised at some of what turns up on her list:

1. Past due toll fees, parking fines, or traffic tickets: If the state or city where you live sends you to collections for not paying a past due fine, it shows up on your credit report. Even if you plan to dispute the fine, don’t let it go to collections. You’re much better off paying the fine now so it doesn’t ding your credit report.

2. Library fines: The library might not report past due fees to the credit bureau, but many do send your unpaid balances to a collection agency—which will show up on your credit report. Detweiler calls out the New York Public Library policy, which states, “…borrowers with fines or fees of $50 or more are subject to contact from a collection agency. A non-negotiable collection fee will be applied to the account of any borrower who reaches that threshold.”

3. Storage fees: Detweiler suggests there are about 48,500 self-storage facilities in the U.S. If you don’t pay your storage fees, even if they auction off your belongings, the owner is not obligated to consider the auction proceeds as payment in full. You’ll likely also hear from a collection agent, see a ding on your credit report, and have to explain why you didn’t pay the bill on your storage unit for the next seven years—even after you’ve lost all your stuff.

4. Closed bank accounts: Closing a bank account doesn’t necessarily cause the bank to ding your credit, but it if you don’t make certain they also close the overdraft line of credit associated with it, you’ll still be charged for any annual fees that might be part of your credit line. Whenever you close an account, make sure you get the final bill—if it’s a credit card, make sure you go through a year’s worth of statements to make sure you don’t miss any recurring charges.

5. Rental car insurance: I often buy the added insurance when I rent a car. One time I was in a parking lot and a truck backing up a trailer crashed into my parked rental car. Because I had insurance, it was no big deal to get the car fixed. However, it doesn’t always work that smoothly. Detweiler suggested, sometimes your personal insurance and the rental car company are at odds when an accident happens in a rental car. “While the insurance agencies and the rental car company argue over who pays for what, you may find you’re stuck with bills that have been sent to collections.”

These are just five examples of some pretty harmless-sounding things that can hurt your personal credit score. It’s easy to sometimes ignore these types of charges, but it isn’t a good idea and can bite you when it comes time to get a small business loan. It’s kind of like those tiny little dinosaurs from Jurassic Park, the Compsognathus, they don’t look very dangerous all by themselves, but 20 or 30 of them can rip you to shreds.

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