How much do you know about credit history?
Are you aware of the factors that influence it and financial aspects that don’t impact your credit score?
Credit scores range from bad (300 – 629) to average (630 – 689) to good (690 – 719) to excellent (720 – 850).
How you fit into one of these categories depends on a series of factors, such as length of credit and payment history, the amount of debt you owe, new credit and mix of credit accounts.
With that being said, some things that impact credit score are downright obvious.
Carrying a high balance on your credit cards is clearly a sign you’re not financially responsible. Opening up a new account to raise your credit limit though, should help smooth things over.
Not all money related aspects affect your credit history.
Other factors, although related to personal finance and how you handle it, don’t have a direct impact your credit score!
9 financial aspects that don’t impact your credit score
Income and net worth
Your employment history does show up on your credit report, but it doesn’t affect your score.
Regardless of how much or how little you earn, your income and net worth won’t influence your credit score at all.
Sure, applying for a mortgage or credit card does require you to provide the lender/issuer with this information, but your credit score won’t go up few points because you have money in the bank, nor will it drop because you earn a small income.
Debit card activity
Debit cards, although similar to credit cards in many aspects, don’t have any impact on your score.
You can use your debit card to make a dozen daily purchases or you may never use it at all. Regardless of your payment activity, your credit report isn’t affected by it.
Paying for your purchases with your debit card only means you’re spending money already available to you. It’s not the same as credit cards, where you have a credit limit you have to handle responsibly.
Bills paid on time
Paying for rent, utilities, phone and cable bills on time is the mature and financially responsible thing to do.
None of these responsible choices show up on your credit report though. On the other hand, forgetting or being unable to pay your bills on time is like a kick in your credit score’s rear.
Unpaid bills end up reported to collections, and that’s definitely not good. Even after you pay off the collections, your case will stay on record for several years and your credit score will suffer.
Don’t be disappointed though. Just keep paying your bills on time and your credit score will remain intact.
Alimony and / or child support
Divorce or separation are not fun for anyone, but when you also have to fork up alimony or child support, yikes!
Your budget will undoubtedly suffer, but the good news is your credit score won’t.
However, just like unpaid bills, not paying child support and alimony on time will get you in trouble.
First of all, it’s not wise to piss off your ex. And second, once the collection agency gets involved, your credit score will drop significantly.
Collecting welfare, disability or food stamps has nothing to do with your credit history.
Just like having a low income, receiving government help doesn’t affect your credit score.
Late or missed insurance payments
Unlike bills or alimony, missed insurance payments don’t usually impact your credit score.
Before the insurance company offers you a contract to sign, they do check your credit history to see how much to charge or if they would even consider having you as a client.
Even clients with excellent credit scores might miss a payment though.
In most cases, the good news is insurance companies prefer dropping your coverage. However, you should probably check with your insurer first, just to make sure they won’t report you to collections.
Interest rates on your credit cards
Without doubt, having a low interest rate on your credit cards is beneficial. Your credit score does affect you being approved or not for certain credit cards and it does influence your interest rate.
However, having a low interest doesn’t mean your credit score will rise. Just like a high interest rate on your credit card doesn’t lower your credit score either.
Marriage implies sharing the financial aspects of your life together, among other things. It’s why many fellow personal finance bloggers insist you have a serious money talk before planning a life as husband and wife.
However, your own credit score is not impacted by your wife’s or your husband’s!
Credit reports might mention your spouse’s name, but the actual scores aren’t linked together.
Applying for a loan as a married couple is a different story though. Lenders will take both your credit scores into consideration before offering you a contract to sign.
Joint accounts are also worth thinking twice about before applying. A joint credit account will affect both your credit scores, regardless if one spouse is responsible and the other spends like there’s no tomorrow.
Checking your own credit score
Checking your own credit score has nothing to do with it dropping or rising.
You can check your credit report on a monthly basis, it still won’t affect your score!
However, this only goes for you checking your own credit history. Other parties inquiring on it can have a damaging effect. Although the damage is minor, it’s still not wise to apply for credit too often.
These 9 financial aspects, although money related, don’t have a direct impact on your credit history.
Other harmless factors, although not linked to finances, include: age, location, whether or not you’ve graduated. You can even get arrested, your credit score will ‘wait for you’ just the way you left it.
Credit scores are a powerful tool that can literally influence your financial future. But rest assure, the 9 money aspects presented above have no direct link to your credit score dropping or rising.
Do you know of other financial aspects that don’t influence credit scores?