If you have bad credit, you’re not alone, according to research from credit bureau Experian, cited by Fox Business. Almost one-third of Americans have a credit score less than 601, a credit score which signals they have bad credit.

If you’ve been rejected for a car loan or credit card, you probably know you have bad credit. But do you know how your credit became poor? If you think you’ve been managing your money well, the following three lesser-known causes of bad credit could be to blame.

Closing a Credit Card

Image via Flickr by jennmae

Closing any credit card you’re not using may seem sensible. However, when you close a credit card, your credit utilization ratio increases because you’re using a greater percentage of your available credit. Your credit utilization ratio should always stay below 30 percent, according to Investopedia. Keeping unused credit cards activated allows you to more easily stay below this optimum level.

Applying for a Business Loan

You probably know your personal credit score will impact whether a bank will give you a business loan, but you may not realize that applying for the loan could see your personal credit score take a hit.

Business loans provider Fit Biz Loans says that while a soft credit pull won’t impact your credit score, a hard credit pull assessing your entire credit history will decrease your credit score by one to five points. Typically, lenders do a soft pull for loan preapproval, then a hard pull if you decide you want to accept the loan. However, some lenders will do a hard pull for every rate quote.

The amount of damage a hard pull causes depends on the loan type, loan size, and your credit health. To minimize the impact, limit rate shopping and ask any potential lenders whether they’ll perform a hard or soft credit check. Be realistic about the amount of money you need, and don’t apply for more money or more loans than you need. Once you have poor credit, you’ll find operating your business to be harder. Some companies such as High Risk Pay will create merchant accounts for business owners with bad credit, but many other credit processors will not.

Neglecting to Pay Library Fines

Library fines may seem like a small deal, but leave them unpaid and you’ll have more than a disgruntled librarian to worry about.

Unique Management Services is a special collection agency tasked with collecting late fees from library users. The company is responsible for more than 900 library systems in the United States, Canada, and England. If you have unpaid library fines, they are likely in this company’s records. Unpaid fines on library materials are as important as any other outstanding bill. Return those materials you checked out years ago immediately, wipe out your library debt, and resolve to adopt better borrowing habits in the future.

The good thing about credit is that you can always rebuild it. Get the basics right and pay attention to the above lesser-known credit killers so that you can turn your bad credit into positive credit.

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