Recently, I saw the movies Deadpool and Deadpool 2. I had them on my list for awhile, but it’s rare for me to have the time to watch movies nowadays. I loved them. They seemed to be new and different. It’s going to be weird to see Detective Pikachu and not think of Deadpool when Pikachu is talking.
In Deadpool 2 there’s a character, Domino, whose super power is being lucky. It’s easy to write a lucky character in a fictional movie. We know that’s not real life. However, I couldn’t help but think that my life has been about as close as you can get to Domino’s.
That’s especially true when it comes to my credit history. I’ve always been responsible with credit and that’s not luck. However, there’s some amount of luck that plays into almost everything we do… and your credit is no different.
With that in mind, I thought I’d highlight four circumstances that where life’s hidden hazards could cost you thousands in future interest payments on houses, cars, and insurance.
1. Rental History
After college I moved back home and lived with my mom for a year while I got a job and started to save a little money. Fortunately, one of my best friends from college practically dragged me into sharing an apartment with him. I was also fortunate that he was very fiscally responsible. Together we never missed a rent payment or even came close.
I believe having a good rental history helped build my credit which became useful later in life. Here are some tips to get the same kind of boost:
- Pay your rent on time – Late payments have the potential to reflect badly just like late credit card payments because some landlords report to agencies that then report to credit bureaus
- Avoid owing back rent, especially upon move out – landlords have the ability to use collection agencies to recover this money and they report to credit bureaus
- When moving out, clean your unit, don’t leave items to haul away, and repair any damages – all of these can add up to high fees and find their way onto your report as judgments against you if not settled upon move-out
Not only will a poor rental history with back due rent, damages, or constant late fees damage your credit, they will also play a huge role in keeping you from renting in the future.
2. Bank Accounts
Back in those days that we were renting (nearly 20 years ago!), you could write a check and count on having a few days before it was cashed.
Nowadays, things seem to move faster almost instantly*. With debit cards and online banking, money ebbs and flows as quickly as you make and spend it. I can take a picture of a check and it is instantly deposited into my bank account. With that in mind, it’s extremely important to manage your accounts carefully and conscientiously. Fees for insufficient funds that are not paid may eventually make it to a collection agency who then reports it to the credit bureaus. It doesn’t happen often, but it can happen.
3. Medical Bills
I think most people would agree that healthcare and student loans are the biggest financial challenges for many today. For this, I wanted to just focus on medical bills. After all it’s not like we are close to fixing health care.
We can do a lot of things to mitigate those bills. We can eat healthy and exercise. We can get appropriate insurance.
However, sometimes health is just dumb luck. If the fates are against you, you may still end up with out-of-pocket expenses like co-pays and patient portions. You may be able to negotiate some of the expenses, but if you can’t pay the bills, they’ll get onto your credit report and damage your score.
It’s not a bad idea to check your score with a free credit report after a few months following an incident just to make sure there aren’t any random bills still out there that may have been forgotten. Back when I almost died eating pizza the insurance and medical billing were pointing fingers at each other and the hospital threatened to send the bill to collections. I may have been lucky in escaping pizza death, but I was unlucky with the billing.
4. State and Federal Taxes
Owed tax is one of those debts that just won’t go away, even with bankruptcy. You don’t want to find out that you owe the government money. While that can be stressful, I’ve heard the IRA will work with you on the payments. Make those payments and you don’t have to worry about a credit score hit. This is one area, where luck doesn’t really come into play. If you are fiscally responsible it you shouldn’t be surprised by a bill that’s too big.
It’s easy to find articles improving your credit score. I even have on hacking your credit score. However, sometimes the best way to good credit is to avoiding the big pitfalls.
* The exception to this rule is when I’m trying to cash the checks from my tenants. Those still seem to take forever to clear.
Our adult child had lived on her own for two years, rents paid on time, had used some revolving credit and paid them off, had a credit score of 720. However, when she recently went to buy a new car she was “penalized” for never having had an installment loan. So instead of the 2.9% interest she ended up with 6.5%. My hope is that in a few months she can refinance to a different lender for a better rate.
Lazy Man says
That’s terrible. My credit score went down a tiny bit recently because we paid off our 1% auto loan. The “red flags” according to Credit Sesame or a competitor was that I didn’t have a student loan either.
The overall score is still great. It’s just weird that it gets taken down for positive financial behavior.
Abigail @ipickuppennies says
Slight aside but on the rental front: Be sure to always make sure your landlord has your new address. We forgot to leave that (though we forwarded our mail, so they could have just mailed it to the apartment and it’d have reached us) when we moved from our apartment to the house. Later we found out we got sent to collections because the carpets needed replacing and they didn’t know how to contact us. So it went straight to collections. Make sure your landlord knows where to find you in case (s)he needs you. You don’t want to get sent to collections over something you could’ve covered.
Lazy Man says
Nowadays, I would how that email would work. As a landlord, I never think to get someone else’s physical address when they move.
My score was lower because I don’t have a mortgage. That’s because my house is paid for! There is something very wrong with that.