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4 Ways to Drive Your Credit Down With Bad Car Moves

Oct. 8, 2014
Credit Cards
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Between adjusting your mirror and choosing a radio station to amp you up for your drive to work, consider the credit implications of your ride. Yes, even your car moves can drive your score down. Avoid making these four mistakes to keep your credit score high and your drive stress-free.

1. Not making on-time loan payments.

The most important aspect of your credit score is payment history. This means your credit priority should be to make your payments on time, every time. If you neglect to pay your car loan payments in a timely manner, this activity may be reported to the bureaus, hurting your credit score. If you continue to not make payments, it gets worse …

2. Voluntarily surrendering or getting your car repossessed.

When you can’t make payments, you can voluntarily surrender your car to the bank that gave you the auto loan. If you don’t, the bank will take your car. This is called repossession. The difference between the voluntary surrender and repossession is minimal when it comes to your credit score, according to Experian. Both damage your credit.

Voluntary surrender is preferable in terms of your credit report and your lender-borrower relationship. Open communication with your lenders is crucial and may help you obtain loans at reasonable rates in the future. And voluntary surrender will be labeled as such on your report. While not ideal, this looks much better, so choose this route if you’ve run out of options.

3. Neglecting to pay parking tickets.

If you don’t pay a parking ticket by the due date, it could be sold to a collection agency. Collections remain on your credit report for seven years — so always pay your parking tickets by the due date listed, generally one month from the date of ticketing. And credit considerations aren’t the only thing you should worry about when you ignore your unpaid tickets. Leaving parking tickets unpaid can result in vehicle impoundment and large fines.

4. Renting a car with a debit card.

The Nerds recommend renting a car with a credit card for the rental car insurance coverage and rewards. But there’s another reason you should choose credit over debit. Renting a car with a debit card can initiate a hard pull to your credit report, knocking your credit score down several points. Check your rental agreement to see if this is the policy of your rental car company of choice.

Bottom line: Every move you make on the road is important, and the same goes for the financial aspects of owning or driving a car. Keep your credit score up by making your loan payments on time, avoiding repossession and voluntary surrender, paying your parking tickets on time and using a credit card when renting a car.

Man driving image via Shutterstock.