We often hear about what affects a credit score (late payments, inquiries, balance-to-limit ratio, etc), but we often don’t think about what doesn’t affect our score.
There are things that say a lot about our financial status, that are not included in our score. Keep in mind that when you apply for a loan, they may ask you about these things separately – so don’t think you’ll be able to hide from your poor financial situation!
5 Things That Do Not Affect Your Credit Score:
Having low interest rates on your credit cards, student loan repayments, mortgages, and car loans is great – not as wonderful as having no debt, but it’s still a good feeling.
However, that wonderful standing does nothing to improve your credit score. This works both ways – if you have terrible interest rates, they will not hurt your score one bit.
This is great news for many of us, who borrow out of desperation, and take whatever interest rate we can get! But for those who can “afford” to shop around for the best loans or take advantage of various credit card benefits, will see no rise in their score after securing a low rate.
It’s actually the other way around. Your credit score and credit history will greatly influence your interest rates.
As we get older, we usually look very hard for any benefits to our age! Unfortunately, a higher credit score isn’t one of them. When your score is calculated, your age isn’t taken into consideration.
However, this is one of those factors that does show up outside of your credit score. Whenever you apply for a loan, you are asked to give your birthday. Many times, your age is used by the issuer of the loan to determine your credit worthiness; but it is not a component in your score.
Pulling Your Credit Report
When a bank, landlord, car dealership, or any other entity pulls your credit report, it counts as a “inquiry”, which lowers your credit score. Well, what if you want to check your credit to ensure that there are no errors, or you’re just curious? Does this mean that you have to lower your score just to take a look at your report?
Fortunately, the credit reporting agencies have developed a system by which they categorize any inquiries on your report. When you take a look at your credit report, it is categorized as a “soft” inquiry. When a creditor does it, it’s known as a “hard” inquiry.
While hard inquiries show up on your credit report and reduce your score; a soft inquiry has no affect.
Having an insanely high salary will not do anything, in and of itself, to boost your credit score. At the same time, a low salary will not drop your score any lower than it already is.
Of course, by having a higher salary, you “may” be in a better position to pay your bills on time, and take care of other matters that will boost your credit score – but there’s no guarantee. This doesn’t mean that you shouldn’t be willing to pay job hunting expenses in order to earn more money. Your income is almost always taken into consideration, alongside your credit score, when a lender is determining your credit worthiness.
Payments That Aren’t Usually Recorded
There are other cases in which your financial performance doesn’t get captured in your credit score. For the most part, your on-time payments are not reported to the credit bureaus. It is only when you make one or more late payments, or fail to pay altogether and have your account turned over to a collection agency, that your history with these accounts are reported to the credit bureaus.
Here are a few examples:
- Bank Account Fees/Overdrafts
- Child Support
- Cell Phones
It may not seem fair that these accounts give you all of the negatives and none of the positives, but that’s why it pays to be faithful and disciplined with your finances!
Do you believe that any of these things should affect your score?
What are some of the myths that you believed regarding this issue?
How often do you check your credit report?