What is not in your credit score

credit reportOur credit scores are becoming more and more important to our daily finances. It was not long ago that credit scores were only looked at and considered when you were applying for a loan or looking to open a new credit card. Today, cell phone carriers often pull credit reports to decide whether or not they will require a security deposit from a new customer. Some electric and cable providers do the same thing. Insurance carriers will often give lower rates on auto insurance to drivers with better credit.

As important as our credit scores have become, there are few people that really understand what factors do and do not contribute to your credit score. Here are a few things that are not factored into your credit score:

Your race, color, religion, sex, and marital status.

United States law prohibits any of these factors being considered when calculating a credit score. Lenders are prohibited from using these factors when deciding whether or not to approve someone for credit.

Your age.

Lenders can consider a person’s age for any kind of credit scoring they might do, however, the official FICO scoring that is present on your credit report cannot consider a consumer’s age.

Your salary, occupation, title, employer, date employed, or employment history.

These things will clearly be important to a lender. Before approving you for a mortgage, they are going to want to see a solid work history and that you have enough income to support the mortgage payment. However, these factors play no role in your credit score.

I cannot count how many times I have encountered someone that when we started talking about their credit they said something like, “Oh yeah. I have good credit. I’m a doctor and make $225,000 a year.” It is a surprisingly common misconception that an individual’s salary impacts their credit score.

Along with your salary, any other income sources such as alimony, child support, or rental income are also not calculated into your credit score.

Interest rates.

The rates you are paying on your car loan, credit cards, and mortgage play no role whatsoever in your credit score.

Certain types of credit inquiries.

Credit inquiries (when someone pulls your credit report to look at it) show up on your credit report. They have a slight negative impact on your credit score. However, there are a few types of inquiries that do not impact your credit score.

Consumer-initiated inquiries (a request that you make yourself to check your own credit) do not impact your credit score. Promotional inquiries (when a lender looks at your credit to send you a “pre-approved” credit offer) do not count into your credit score, as well as “administrative inquiries” (when a lender reviews your account with them). If a new employer pulls your credit as a part of their background search before hiring you, it is not counted into your credit score either.

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