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5 Things That Don't Affect Credit

The ever-increasing hype over the importance of credit scores has led to a lot of bogus myths about what actually determines them. You’ll be happy to know that what you ate for breakfast or how well you can balance on your left pinky toe while checking your bank statement has absolutely no bearing on this elusive three-digit number.

In short, there are five key factors that are used to calculate your credit score (payment history is the most important of these). But the aim of this particular post is to dispel the rumors about other factors commonly believed to influence your credit score. So here’s a list of five things that have no impact on your credit rating (insert sigh of relief here).

#1 - Your income

The amount of money you make is surprisingly not factored into your credit score. You can earn a pittance and still have a stellar credit score, as long as you pay back your debts on time and follow some other credit-improvement tips. On the other hand, plenty of super-wealthy people have terrible credit (too busy on their yachts, I suppose, to be bothered with paying those pesky monthly bills).

Note that lenders will still want to know your household income before granting you a credit card or a loan, so income still affects your ability to borrow money. But it’s not a part of the popular consumer credit scoring models.

#2 - Most credit checks

Credit checks and how they impact a credit score is a topic riddled with misinformation. The truth is that there are two kinds of credit checks: those that ding your credit (hard inquiries), and those that don’t (soft inquiries).  Examples of soft inquiries (sometimes called soft pulls) include:

  • Promotional inquiries: When companies pre-screen you to send "pre-approved" offers of credit.
  • Administrative inquiries: When creditors with whom you have accounts periodically check your credit.
  • Employer / landlord inquiries: When employers or landlords pull your credit when you apply for a job or an apartment.
  • Consumer inquiries: When you pull your own credit report or credit score.

All of these inquiries don’t hurt your credit score in the slightest, but you will see a record of them listed on your credit report (usually remaining there for one to two years). Examples of hard inquiries, or those that do damage your credit score, happen when you apply for a new credit card, loan, or even occasionally a cell phone or utility service.

#3 - Age, location, and other personal information

While your birth date, address, and sometimes marital status or gender is listed on your credit report, those personal identifying factors do not influence your credit score. It is illegal to let your race, sex, color, creed, or marital status influence your credit rating.

#4 - Credit counseling

Simply signing up for credit counseling will have no affect on your score. Getting advice from a credit counselor about your financial situation is just plain smart. It’s not until you take specific actions, like consolidate your debt, declare bankruptcy, or refinance your mortgage that your credit score will take a hit.

#5 - Medical history

The Fair Credit Reporting Act prohibits listing any medical information on your credit report, let alone using it to calculate your credit score. Note that this doesn't apply to collections accounts related to medical debt (those will hurt your score). But any information concerning your physical or mental capacity is forbidden from entering your credit report, and is not factored into your credit score. This isn’t to say that if you enter a bank to get a loan and act like a total crazy person, you’ll still be able to borrow money. But you’ll be denied because of your outrageous behavior, not your awesome credit score.

Carrie Davis is the lead columnist for SpendOnLife.com, an online resource dedicated to ensuring readers have the latest and most thorough information on credit, debt, and identity theft. She has a passion for educating others on how to achieve financial independence. Follow Carrie through the SpendOnLife RSS feed or on Twitter @SpendOnLife.

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Alice Bryant's picture

Alice Bryant is the Editor of Creditnet and a personal finance expert with over a decade of experience writing about credit cards, credit scores, debt repair, and more.

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Jordan M.'s picture

Good summary...I would also mention that interest rates you're being charged on installment accounts or credit cards don't have any effect either. Sometimes people get confused by that.