You want a good, clean credit report, right?  Of course you do. We all want to keep our credit as tidy so we can borrow money at a low interest rate and keep our insurance rates and security deposits down.  It is very important to work on raising your credit score, but it is also important that you understand what does not affect your score.  That way you won’t spend time worrying about things that just don’t matter.

Here are 6 things that can’t hurt (or help) your credit scores:

 #1: Your Personal Information

Personal information such as your name, current and previous addresses, Social Security number, and birth date is included on your credit report with each of the three main credit reporting bureaus.  However, this information does not have any bearing on your credit score. They also cannot factor in your age, education level, race, gender or marital status. 

 #2: Income Changes

Most people are surprised to learn that income isn’t included on your credit report.  As long as you continue to pay your bills on time, earning less has no negative effect on your credit scores.  However, creditors generally ask for your income information on their applications. So, making less money could be a stumbling block to getting new credit because in addition to your credit score, your income, expenses, and job stability are taken into consideration by a lender.

#3: Getting Turned Down for Credit

Although your credit report does show who has been looking at your credit report, your credit report doesn’t show whether an application for a loan or credit card was approved or declined.  Don’t worry if you’ve been turned down for credit.  This has absolutely no effect on your credit score

#4: Paying Small or Local Companies

Bills you pay to small companies or individuals for local services like lawn care, pest control, or rent, usually don’t show up on your credit report. The main credit bureaus have strict requirements about who can report consumer information to them, and in many cases it’s just not feasible for small businesses to do so.

If a merchant doesn’t report payment information to the credit bureaus, then your payment history with that company can’t affect your credit scores. However, if you don’t pay up and they turn your account over to a collection agency, that’s another story! Collection companies will report information to the credit bureaus as soon as they acquire the debt.

 #5: Adding an Authorized User

Adding someone to your credit card as an authorized user allows them to get a card in their name and to make charges up to the credit limit that you allow. An authorized user has no legal responsibility to repay the debt. Their credit situation can’t affect yours in any way.

However, your credit scores could plummet if an authorized user abuses a credit card and you can’t afford to make the minimum monthly payments. So always be cautious about adding anyone to your credit cards.

#6: Checking Your Own Credit

Many people worry about pulling their credit report because they think that it will count against them. Pulling your own credit report is called a “soft pull” and it does not hurt your credit scores.

Understanding what does and does not have an effect on your credit score will help you to focus your efforts in the right areas.  If you need help eliminating debt once and for all, our Debt Solutions Specialist can explain what programs are available to help you no matter what the situation.  Simply give us a call or click on the link for a free debt elimination consultation.

photo by: Casey Serin

Your credit score is like a financial report card, and like a report card you are usually not the only one to see it. Applying for loans, mortgages, bank accounts, and new cars loans all require a credit check. There is much more that goes into building a good credit score than just paying your bills on time. To you understand just what does build and destroy a credit score, I have compiled the following list.

1. Accounts
   Depending on the type of accounts you hold, and how many, your credit could gain or loose points. Generally, a good mix of account types makes for good credit. Having a mortgage, car loan, and a couple credit cards in good standing should leave you with a lot of valuable credit points.
2. Payment History
   Your payment history on loans and credit cards can affect your credit for years to come. Making payments on time will add points to your credit credit score. On the other hand, missing payments often can result in the loss up to 100 points!
3. Owed Debt
   If you have debt then it may drop your credit score. However, some debt is actually good for your credit score. Having credit cards and mortgages, can help build your credit if you regularly make your payments. However, if you owe a lot of debt to many different lenders, it could potentially destroy your credit. A good rule of thumb is to keep your loans in check, and never borrow more than you can pay off.
   
4. Credit Age
   If in good standing, having credit for a long time should improve your credit score. Try keeping accounts open for a long time and making payments regularly and on time. If you are new to the credit game and are just starting to build your score, then you want to make sure and open an account that you know you will be able to keep.
5. Loan History
   Taking out a loan does not necessarily take down your credit score. Actually, taking out a loan for something like a car could help your credit. However, late payments or very low payments and high interest could get you in to trouble and hurt your credit score. Always think of your loan in the long term before you take one out.
6. Credit Checks
   You may be surprised to know that having someone check your credit (i.e. a new employer, landlord, or lender) will drop it by few points. This is frustrating, but an unavoidable fact. To help prevent yourself from missing out on too many points, try to reduce to the number of times you have your credit checked, and only have it done when absolutely necessary. Read More --> Hard Pull vs Soft Pull: What's the Difference?
7. Unpaid Parking or Library Fines
   Although they may seem unrelated to your credit, having unpaid parking violations, or library fines can negatively affect your credit score. It is always a good idea to pay off any debt, regardless of how small or seemingly unrelated.
8. New Credit
   Getting too many credit cards is a sure way to hurt your credit score, no matter if you make timely payments or not. In this case, consolidating some cards could help you in the future. While consolidation will normally drop your score by a few points, building credit will be easier from then on.
9. Collections History
   Having a history of being given over to collections does not look pretty on a credit report. If you are looking to get a big loan or buy a house, try to take care of any situations involving a collections agency first. Over time, the scar of being put in collections should start to fade, but not until you pay off the debt and start rebuilding your points.
10. Bankruptcy
    Filing bankruptcy is never fun to go through, and rarely good for your credit. If you have or need to file bankruptcy, be prepared for a plummet in your score. There are some options to help you avoid bankruptcy all together.  Bankruptcy should only ever be used a s a last resort.  However, bankruptcy can be the best option for someone who realistically has no way of ever paying their debt down.

Does your Credit Report Card have room for improvement?

Now that you understand what can help and hurt your credit score, what does your credit report card look like?  If you are struggling to get your credit "GPA" up, you might need a tutor.  The Solutions Specialist at Debt Relief can help you work though your credit issues and find a solution tht best fits your needs. 

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When most people think of a credit check, they think of this vague thing where the someone checking their credit puts in their name and other private information and gets this number along with everything they have ever done wrong financially. However, it’s a little known fact that there are actually two kinds of credit checks: Hard Pulls and Soft Pulls.

So, what is the difference between a Hard Pull and a Soft Pull?

Soft pull

This is a basic inquiry of your credit score, and is meant for informational purposes only. a soft pulls does not show up on your credit report.

Examples of a Soft Pull:

• Checking your own credit
• A lender checking your credit for "pre-approval"
• An employer checking your credit
• A landlord checking your credit

Hard pull

A Hard Pull is the complicated report that gets done when you apply for a loan, mortgage, as well as many other things. This type of credit check can affect your credit score.

Examples of a Hard Pull:

• Credit check when applying for a mortgage
• Credit check when applying for a credit card or signature loan
• Credit check when opening a new checking or savings account
• Credit check when opening a new wireless phone account
• Credit check when you open a new cable television account

The first couple of Hard Pulls don’t really do anything, but after several in a row, it will start to affect your credit score. If you’re opening multiple accounts that require multiple hard pulls, you’re spending a lot more money. If you are already paying on several accounts that you have recently started, how do they know that you’ll be able to continue your payments on another new account? Luckily, this is only 10% of the total calculation of your credit score.

So, what does this all mean to you?  First, be aware of how often your credit is bing looked at, and try not to have too many Hard Pulls at the same time.  Next, feel free to shop around a bit for the best home loan, but make sure to find out all of the details first and only apply for your top couple of choices. Finally, keep checking your credit report for inacuracies, and report any errors that your find.  Checking your own credit does not affect your credit score, and making sure that the information is accurate will help you when you do apply for thos more complicated loans.

phot by: the Italian voice