There’s no doubt that having a hobby or past time in this crazy, hectic world is a good idea. Hobbies are very relaxing (in most cases) and can give the hobbyist a lot of joy and pleasure.
That being said, the wrong hobby can definitely do damage to your credit and credit score if you’re not careful. In fact, the 4 popular hobbies below could damage it quite easily. Luckily we’ve put together some tips to help you avoid that and keep your credit looking good, no matter how you enjoy spending your time off. Enjoy.
Hobby 1: Borrowing books, movies and music from your local library.
Most people would never believe that borrowing books, CDs and DVDs from their local library could affect their credit, especially considering that it’s a free service. The problem is that, these days, libraries are commonly turning large, unpaid overdue book fees over to collection agencies in order to recoup that money. If this happens, the chance that the debt collector will report it to your credit bureaus is high, putting a mark on your credit report that could damage your credit for at least 7 years, if not longer.
Normally collection accounts that are less than $100 are ignored but, depending on how much reading, listening or watching a person does, they could easily exceed that amount. The point being, make sure your return those books and DVDs on time and, if you don’t, pay the fines quickly.
Hobby 2: Traveling the world.
For many people there’s nothing like the adventure of heading off to a new location in a different part of the country, or the world. Exploring a new and exotic locale is a wonderful way to expand your horizons, no doubt, but keep in mind that while you’re away things go on like normal back home. That includes credit card bills, mortgage payments and so forth.
The problem is that, since 35% of your FIFO credit score is made up of payment history, if you forget to pay any bills while you’re away your credit score will take a big hit once you get back and (late) pay them. One way to avoid this is to set up text and/or email reminders for yourself before you leave or, even better, set up automatic payments. If you don’t, and you forget to pay some bills, that relaxed feeling you have when you return will fade rather quickly.
Hobby 3: Working around your home and/or gardening.
Another wonderful way to relax is to work on your garden or putz around your home making improvements here and there. Of course this means frequent trips to your local home improvement warehouse store and possibly a retail credit card from your fave. One mistake that many consumers may however is to open several of these retail credit cards at the same time when they have a big project, because new credit applications account for 10% of a person’s FICO score.
When credit card bureaus see that a consumer has applied for several credit cards within a short period of time, they assume it’s because that consumer is having financial problems. Your best bet is to wait at least 6 months between applying for credit cards and, if your credit score is low already, waiting 12 months. This should keep that beautiful new garden from eating a hole in your credit score.
Hobby 4: Shopping till you drop.
For many people (ladies, you know who you are) shopping for new clothing and other items, and getting a “great deal” on them, is very satisfying. These days, with the advances in online shopping, engaging in this hobby is easier than ever before.
However, since about 30% of your FICO score is based on credit utilization, keeping a large outstanding balance on your credit card can damage your credit score. Financial experts recommend keeping this credit utilization at 20% or lower, something that might be difficult if you’re a “shopaholic”. Keep in mind that, even if you pay off those cards every month, every time that your credit utilization ratio rises above 30% your credit can suffer.
One tactic that you can use is to spread your spending between a number of different cards so that your credit utilization ratio on each one remains low, but then there’s the problem of paying off all of those cards in full every month as well. If you don’t, that “great deal” that you got on those new jeans might end up costing you more than if you had paid full retail.
At the end of the day, having a hobby or pastime that relaxes you is definitely not a bad thing. The point is to make sure that your hobby doesn’t damage your credit and create even more stress for you.