15 Things That Will Not Affect your Credit Score
Everyone likes to appear good in the eyes of the credit bureau agencies. They want to do things that will boost their credit score. On the other hand, people try as much as possible to desist from those things that can hurt their credit scores. Unfortunately, in some cases, people focus on wrong things and ignore the main things. This can be likened to students that focus all their attention on minor courses and ignore the major courses.
For people who didn’t have the privilege of attending college or university, I will explain what this means. All courses are weighted based on their relevance to the disciplines of students in each department. Those courses that are considered very important to a particular discipline will carry very high weight while borrowed courses from other department only will carry just few points. For example, for somebody studying accounting, financial accounting is a very relevant course and it can carry as high as between 3.5 and 4 points while a course like Physics will be considered not relevant because it is meant from science students. Therefore, it can just carry weighted point of less than 1. So, if an accounting student should score 100% in Physics and then score around 50% in financial accounting, that student may just manage to graduate with pass grade. But if he can score says like 70% in financial accounting and then score around 50% in Physics, the student may graduate with a distinction grade. Can you see the difference? The difference is just about focusing on what matters. Sorry for this digression. I just want everybody to understand the importance of this topic. In most cases, those people that are usually over conscious about their credit score are those people that have been hurt already. They try whatever possible to improve their credit score. I hope this article will provide them a clue on what that don’t count when it comes to building credit score.
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So, let’s set the ball rolling by looking at those things that will not affect your credit score.
Your income: The amount of income you earn does not directly impact your credit score. Employers don’t report your earnings to credit bureaus. Therefore, it does not matter whether you earn very fact salary or just a peanut. What is important is how you are able to manage your credit. Somebody can be earning a million dollars every month and still have a very bad credit score. On the other hand, somebody earning just $2,000 can have excellent credit score. The only influence your income may have on your credit score is that, if you earn good salary, this can help you ensure that you pay your credit card balances on time without missing or delaying payments. Of course, this still requires personal discipline.
Soft inquiries: When you check your own credit report or credit score by yourself, it is regarded as soft inquiry. And this cannot hurt your credit score as against hard pull usually made by lenders. Instead of just checking your credit score, it may be better to request for free credit report from AnnualCreditReport.com. You are entitled to one free annual credit report from each of the three major credit bureaus in a year. With credit report, you will be able to know what went into your credit file. You can see if there are errors in the report. If there is any error or anything you don’t understand in the report, you can dispute it. When such error is corrected, it can improve your credit score a bit. You can check your credit score as many times as possible. It will not hurt your credit score. It will only help you monitor the direction that your credit score is going.
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Interest rates on your accounts: Your lenders do not report the interest rates you pay on your loans to the credit rating agencies. Therefore, interest rates do not affect your credit score in any way. Instead, your credit score can influence the interest rates that your lenders may ask you to pay on the loans they grant you. If your credit score is excellent, you may be able to enjoy very cheap interest rates. Lenders consider people with excellent or good credit score as creditworthy. They believe that such borrowers will not have problem paying back their loans. So, instead of directing your attention to your high interest rates, you should strive to improve your credit score. A good credit score can help you enjoy lower interest rates.
You age: In fact, this one makes me laugh. Your age is not a criteria for measuring your credit score. If age matters, it means that all our seniors should have excellent credit score. If they talk about age when it comes to how credit score is calculated, they are not talking about the age of the account holder. Instead, it is the age of your account they are referring to and it makes up 15% of your credit score. The only area your age can have impact on your credit score is if you take the advantage of it by starting building your credit early enough. Let’s assume that you are now 45 years old and you had your credit card at the age of 21, your account will be 24 year old by now. If you have been using the card responsibly, the age of the account will count for you. At the same time, you might have built good credit history.
Your debit card: Your debit card is totally different from credit card even though they look the same and you can use the two cards to make payments. The main difference is that, when you use debit card to make payments, you are actually spending your own money. It is not a credit. Therefore, such transactions are not reported to the credit bureaus. But in the case of credit card, you are using borrowed money to make payments. You will then have to pay the amount back to your credit card issuer later. The way you use your credit card will impact on your credit score. But if you only use your debit card to make payments, nothing will be reported to credit bureaus. For instance, you search online for restaurants near me, you then place order and pay with your debit card, it is as good as paying with cash because the money is immediately deducted from your bank account.
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Your utility payments: Your utilities providers don’t report your payments to the credit bureaus. Utility payments include water, heat, electricity and cell phone bills payments. However, if you don’t pay your bills on time and it is sent to collection agency, it will then be reported to the credit bureaus. And this can hurt your credit score. As long as you pay your bills on time, payment of your utility bills will not affect your credit score in any way.
Your insurance: Your insurance company may use the information about your credit to determine the insurance premium you will pay. But your insurer doesn’t report the payments of your insurance premium to the credit bureaus. Even if it happens that you default, your insurer would rather cancel your policy than wasting their time sending the balance to collection.
Your education: Your education is not part of your credit report. So, it does not affect your credit score. Nevertheless, the kind of education you have among other factors may help the credit card companies in deciding the interest rate that may apply to you. Also, if you are exposed to personal finance education, this can help you in the way and manner you handle your finance.
Overdrawing your checking accounts: Whether you overdraw your checking account or your check bounces due to insufficient fund in the account, this will not be reported to the credit bureau and it can’t be in your credit report.
Child support and alimony: For people who are paying child support or alimony, this does not impact directly on your credit score. The only problem is that, if you don’t pay on time and you allow the payments to be passed to collections, the collection agency will report this to the credit rating agencies and this will hurt your credit score.
Shopping for loan: When you apply for loan, the lender will put hard inquiry on your credit file in order to ascertain your creditworthiness. If you are shopping for the same loan from different banks in order for you to get a good deal, you don’t need to panic about this. Credit bureaus understand this. The only thing is that you need to do the shopping with very short space of time so that the inquiries would not be treated separately. FICO will treat all inquiries received within 45 days as single inquiry while VantageScore only allows shopping window of 14 days.
Credit counselling: Seeking for help from experts on how you can improve your financial situations will not hurt your credit score. Therefore, if you feel that such service can help you improve the way you handle your finance, don’t hesitate.
Where you live: People usually confuse credit score with insurance premium when it comes to the effects that where you live can have on your finance. It is the insurance companies that consider your location when determining your car insurance premium. Your residence address may appear on your credit report but it does not affect your credit score.
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Marital status: People usually want to know if the credit of their spouse will affect their own credit score. Your marital status doesn’t affect your credit score as your account is not linked to that of your spouse or vice versa.
Your networth: Whatever the amount of cash you have sitting in your bank account or any investment you have elsewhere, none of these contributes to the calculation of your credit score. But for people seeking mortgage, having large sum of cash in your bank which you can apply for the repayment of the mortgage can increase the chance of getting approval for your mortgage application.