9 Factors That May Not Affect Your Credit Score
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Having a higher credit score comes with a variety of benefits, including lower interest rates on lines of credit and loans, better terms on loan products and the flexibility to apply for more credit.
However, when you spend a lot of time focusing on increasing your credit score, it’s easy to forget that some pieces of your financial life don’t impact your credit score at all. Knowing what to focus on — and what won’t have any impact — is key to creating a game plan to increase your credit score.
9 factors that may not affect your credit score
There are several factors that may not have an impact on your credit score. Some people believe many of the “credit myths” floating around and are concerned that every element of their life can impact their credit score. Here are a few factors that don’t have an impact on your score:
Income isn’t part of a credit report and isn’t looked at by any of the three credit reporting bureaus when calculating your score. Although someone may have a high income, that alone isn’t an indicator that they’re good about paying their bills on time or staying within their recommended credit utilization rate.
Checking your own credit
Credit scores aren’t affected when you check your own credit report or score. When you check your credit, you’re asking for a “soft” inquiry — which doesn’t impact your score.
How much money you have
Many people think that their credit score is impacted by how much money they have in the bank or the value of their assets. The truth is that credit reports don’t list bank account balances or assets, and those numbers don’t impact your score. This myth may come from the fact that your banking history can, in part, impact your credit score. For example, if you have a history of bouncing checks and not paying the money back, the bank may send the debt to a collection agency — and that would show up on your credit report.
You may have noticed that when you apply for insurance, the company may pull your credit score. Insurance inquiries are soft inquiries on your credit report, so they don’t affect your credit score. It’s also important to note that insurance inquiries will only be visible to you on your personal credit report — they’re not shown to lenders.
Education level does not impact a person’s credit score. Credit scoring models only consider information about your debt and repayment habits. Loans, bankruptcy, credit cards and payment history are all part of the scoring equation and will appear on your report.
Your credit score isn’t impacted by unemployment filings or claims. So, being unemployed doesn’t automatically impact your credit score. Keep in mind, though, that if you’re unable to make debt payments as a result of your unemployment, that will affect your score.
Just the act of getting a divorce doesn’t impact your credit score. That being said, as you and your soon-to-be-ex-spouse unravel your shared finances, it’s important that you both deal with any joint debt you have before the divorce is finalized. Although your divorce decree might help to “divvy up” your debts, that doesn’t change who’s responsible in the eyes of the lender. Delinquent payments on this resulting debt will impact your score.
Marriage has several financial benefits, including lower car insurance premiums, more Social Security options, having two incomes to achieve financial goals and additional tax benefits. But due to the Equal Credit Opportunity Act, your race, gender, marital status, national origin and religion can’t be used as factors that impact your credit score.
A payment that’s fewer than 30 days overdue
You may be panicking when you realize that your mortgage payment is a day late, but that’s not how credit reporting bureaus score late payments. Your payment needs to be a full billing cycle late in order for a credit reporting bureau to record it at all.
According to myFICO, late payments are categorized by:
- 30 days late
- 60 days late
- 90 days late
- 120 days late
- 150 days late
- Charge off (written off as a loss)
Of course, it’s not a good idea to get into the habit of paying your bills late, but missing one or two periodically by fewer than 30 days isn’t going to impact your credit score. It’s also good to remember that credit reporting bureaus look at both how late the payments are and how frequently your payments are late.
Keeping your credit score in good shape
Although these factors may not affect your credit score, there are several that can. Paying your bills on time, keeping your credit utilization at 30% or less, only opening new accounts when necessary, paying off credit card debt and keeping unused cards open are all ways that you can start to build your credit score today. You can also check your credit score easily, and for free, using a system like LendingTree’s free credit reporting tool to make sure that you’re aware of recent activity that’s affecting your score.