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What doesn't affect a credit score?

Sep 29, 2015 Walt Wojciechowski

What doesn't affect a credit score?

Across the country, millions of consumers have started to focus on what affects their credit scores. And while that kind of effort to better understand their ratings is a good idea, it should also come with the caveat that there are still many misconceptions lingering in the general public about what does and does not end up impacting scores. Specifically, it might be wise for consumers to figure out what has no impact, because it allows them to devote more effort toward fixing the things that actually matter.

When it comes the issues related to credit, consumers should try to keep in mind that it's specifically related to how they've handled accounts on which they owe money, according to a report from the Better Business Bureau. Things like age, race, religion, immigration status, sex, and even marital status don't matter at all here. However, it is important to note that married couples trying to get credit together, such as for a credit card, auto loan, or mortgage, will be judged jointly on their individual credit histories, meaning that those who have struggled before might end up hurting the chances they and their partners are approved.

What else weighs in here?

In addition, it's also important for would-be borrowers to keep in mind that whether they have a job and how much money they make, among other things related to employment, likewise have no bearing on their scores, the report said. Of course, those with low-income jobs are going to be more likely to run into credit difficulties if they can't keep their borrowing under control, but the fact is that employment data doesn't play a role here.

In addition, the places people live - such as their neighborhood or even city - also cannot be considered in determining credit standing, the report said. This is also true when it comes to states or even regions.

A caveat
However, much of this information can be considered in some credit-related situations, the report said. For instance, when applying for larger amounts of credit, income - through the lens of debt-to-income ratio - might come up on occasion. This is also true of things such as past mismanagement of credit that might have been long enough ago it no longer shows up in a score, but still lingers on a report for what could be years. For that reason, consumers will have to keep a close eye on their credit reports as time goes on, and learn from past mistakes they may have made, even if it was through no fault of their own.

Credit scores have been criticized for not using enough financial information about how people have handled their various obligations. As such, alternative credit scores - which take into account things like monthly utilities and even rent payments - may be extremely beneficial to them because it helps to paint a more complete picture of their financial standing, and puts them in a better position to succeed going forward.