Having good credit goes a long way – it opens the door to many wonderful benefits and perks. There are plenty of factors that factor in a credit score.
People who are focused on raising their credit scores think that all factors pertaining to finances and personal history affect their credit score and would make all decisions based on all those factors. However, you might be surprised to know that there are factors that you thought influenced your credit scores actually don’t.
While it’s important to learn how to raise your credit standing, it’s also important to understand what factors do not make an impact in order to make smart decisions.
Some people may think income is a factor, but it isn’t. It may become a factor for loan and credit application, but it won’t show up on your credit report. A credit report only shows how much you’ve borrowed in the past and how you’ve been paying the amount you’ve borrowed, but never your actual salary and how wealthy you are. Having a high salary won’t boost your credit score nor will having a low salary drag it down.
Checking Your Credit Report
Checking your own credit report never actually damages your credit score. It only shows up as a soft inquiry when you do it personally through reputable credit bureaus or a legitimate third party. However, having a lender do the checking for you would show up as a hard inquiry and will lower your credit score. It is actually recommended that you do it regularly in order to stay on top of your finances and catch any irregularity dead in its tracks. In fact, you can do it as often as you like. But you should never micromanage.
Personal information is included in your credit reports like your name, current and previous address, social security number, birthdate, and public information such as a recorded lien or bankruptcy. It does not include your race, gender, marital status, education level, religion, or political party and will not affect your credit score. Even your age won’t have an impact. The age of your credit history, however, will be a factor. The length of the relationship you have with the same provider will have a positive impact on your overall score.
Using a Debit or Prepaid Card
The credit report only includes credit accounts and not bank accounts, nor the use of prepaid cards. They are great for staying in budget and controlling your spending, but they will not do anything for your credit score. You are using money that you already have and not borrowing money on credit.
Overdrawing accounts can be very expensive as it might lead to paying overdraft fees. These can be especially expensive if you have multiple overdraft transactions in a short period of time. Fortunately, overdrafts won’t affect your credit score – provided that you clear them up immediately before they reach debt collections. Letting them remain overdrawn until they reach a collection agency will hurt your credit score because it becomes a debt collection charge.
Child Support and Alimony
In the same way as overdrafts, payments for child support and alimony payments will make an impact on your credit score as long as you are making payments regularly and avoid getting a debt collection agency involved. If you start falling behind on your payments and a debt collection agency enters the picture, they will end up on your credit report and will hurt your score.
Your credit scores will only matter for insurance payments when applying for coverage since insurance companies will want to check your credit score to decide whether to insure you and calculate your insurance premium. They won’t report any payments you make, much less late payments, to credit bureaus and won’t affect your score. Again, be careful if you miss too many payments and these charges end up going to collection agencies.
Being Denied Credit
Being turned down for credit will not impact your credit. It will show up as a hard inquiry but won’t really make a great impact. Credit reports don’t really show whether an application for a loan or credit card was approved or declined. However, being declined for credit might incline you to apply for other credit cards or loans. Multiple hard inquiries showing up on your credit report will indicate financial troubles and will lower your credit scores.
A credit history is personal and will never merge with someone else’s – not even when you’re married. You can’t increase your credit scores if you get married to someone who has good credit, nor will you lower his/hers. It might hurt your chances of getting a loan or credit card, though, if one of you has bad credit.