Credit Score Conundrums: A Look at Factors that Don’t Matter

For Americans that haven’t been financially hit by the COVID-19 pandemic, it’s a great time to purchase a home or refinance an existing property. And for those that have suffered financially, perhaps taking out a personal loan or applying for a line of credit to help get you through these times is under consideration. Regardless of either scenario, the lender you work with is certain to run a credit check on you before any approval is granted to ensure you’re a qualified, reliable buyer.

It seems that any time we ever talk about credit scores, there’s always a lot of confusion as to what counts toward it and what doesn’t. And being that lenders are seeing a rise in applications now and likely into the future, now is as good of a time as ever to remind Americans of what they don’t need to concern themselves with as it pertains to their credit scores. This way if your score needs improvement, you won’t waste time repairing things that aren’t taken into consideration. Here’s a look:

1. Your Salary or Profession

It doesn’t matter whether you’re a high-level executive earning a six-figure annual salary or a bartender who makes most of your income off of gratuities. The only thing that matters to a lender is whether you’re able to pay back the loan that you’re applying for based on what you earn (and if your prior financial history backs this up). Salary and profession don’t factor into a credit score at all.

2. Interest Rates on Current Credit Cards

While high interest rates on loans and credit cards that you currently possess can potentially be an indication of approval with an average credit score, current interest rates have absolutely no bearing on your credit score.

3. Where You Live

While where you live geographically can impact the cost of your homeowner’s and auto insurance, don’t confuse this for also impacting your credit score. Where you live has no effect on your credit score.

4. Your Age

It’s a common misconception that older individuals have better credit scores than younger ones due to age. And while this may be true generally speaking, it’s likely because they have less debt and a longer credit history – it’s not because FICO gives extra points based on some senior citizen bonus.

5. Race, Religion and Sex

If the credit reporting bureaus took these three factors into consideration, they’d likely have a variety of lawsuits on their hands. It’s why it is illegal to factor this into any credit scoring.

Remember, the main things you need to be worrying about when it comes to earning a good credit score is having a history of making on-time payments, shrinking your debt-to-credit ratio, building a diverse credit history, and regularly checking your report for any errors. If you’re mindful of these factors and enact the right strategies, you can take an average credit score to good and a good credit score to great within just a few months.

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