Your credit score is a powerful tool that can help you secure loans, get lower interest rates, and qualify for better deals on housing and insurance. But if you have memberships that are dragging your score down, it’s time to take action.
How Can a Membership Hurt My Credit Score?
Memberships can negatively affect your credit score in a number of ways:
- Late payments: If you’re late on your membership payments, the lender may report the late payment to the credit bureaus, which can lower your score.
- High balances: High balances on your membership accounts can also hurt your score. When you have a lot of debt relative to your available credit, it shows that you’re a high-risk borrower.
- Hard inquiries: When you apply for a membership, the lender will typically pull your credit report. This is known as a “hard inquiry,” which can also lower your score.
If you decide that you need to cancel a membership, there are a few steps you should take:
- Check your credit report: Before you cancel your membership, it’s a good idea to check your credit report to see how it’s being reported. This will help you identify any errors that you need to correct.
- Contact the lender: Once you’ve identified the membership that you want to cancel, contact the lender and inform them of your decision. Be sure to get a confirmation in writing.
- Pay off any outstanding balance: If you have any outstanding balance on your membership account, be sure to pay it off in full before you cancel. This will help you avoid any late payments or collection accounts that could damage your credit score.
- Dispute inaccurate information: If you find any inaccurate information on your credit report, you can dispute it with the credit bureaus. The bureaus are required to investigate any disputes that you file, and they must correct any errors that they find.
In addition to canceling memberships that are hurting your credit score, there are a number of other things you can do to improve your score:
- Pay your bills on time: This is one of the most important factors in determining your credit score. Make sure you pay all of your bills, including your credit card bills, your utility bills, and your rent or mortgage, on time every month.
- Keep your balances low: As we mentioned earlier, having high balances on your credit cards can hurt your score. Try to keep your balances below 30% of your available credit.
- Avoid new credit inquiries: When you apply for new credit, the lender will typically pull your credit report. This is known as a “hard inquiry,” which can lower your score. Avoid applying for new credit unless you absolutely need it.
- Build positive credit history: The longer you have a good credit history, the higher your score will be. Make sure you use your credit cards responsibly and pay your bills on time.
If you’re looking to improve your credit score, canceling memberships that are dragging you down is a great place to start. By following the steps outlined in this article, you can cancel your memberships safely and effectively.