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8 factors that don't affect your credit scores
8 factors that don't affect your credit scores

Yahoo

time5 days ago

  • Business
  • Yahoo

8 factors that don't affect your credit scores

Consumers are really confused about what goes into their credit scores. As a credit expert and a former NFCC-certified credit counselor, I've heard every myth in the book about how credit scores work. In fact, I've even counseled people who were so convinced by something wrong they'd heard from a friend or saw on TV, that I could not change their minds. So let's set the record straight. There are many financial behaviors that, surprisingly, have no impact on your credit scores. As a general rule of thumb, if it doesn't have to do with debt, it doesn't impact your scores. However, knowing more of the specifics can save you the time and heartbreak that comes from acting on bad information. The main information that impacts your credit scores is your history with managing credit cards, loans, and unpaid bills that turn into debt. Despite what you may have heard, the following information has no impact whatsoever. Most of the information you see in your credit reports is factored into your credit scores, but personal information is an exception. The following personal details are only listed in your reports to help confirm your identity, but not to calculate your scores: Name (including names you've used in the past) Date of birth Social Security number Phone numbers Home addresses Names of your employers Another popular myth about how credit scores are calculated is that your demographic information (such as income level, ethnicity, or age) is included. It's understandable why people believe this, since it's well documented that demographics have a major impact on consumers' finances. If you're struggling financially, for example, you're more likely to miss a debt payment. As a result, you could end up with damaged credit, making it difficult to qualify for loans and credit cards from reputable creditors. However, it's important to know that your credit scores are based solely on the information in your credit reports, and they do not contain demographic information. So while it is accurate to say that demographics impact credit, that data is not used to calculate your scores. The most popular credit myth I've heard is that pulling your own credit reports hurts your credit scores. This myth can be incredibly harmful, since it keeps people from learning what's in their credit reports, making necessary improvements, and even catching early signs of identity theft. The truth is that pulling your own credit reports not only has no impact, but it's also essential for building and maintaining good credit scores. You can pull all three of your credit reports (Experian, Equifax, TransUnion) for free at There's a lot of confusion about how your credit scores are impacted when someone checks your credit. If you apply for a loan or credit card, and your credit is pulled to determine if you qualify, your credit can be impacted. These credit pulls show up on your reports as "hard inquiries," and according to FICO, you will usually lose less than five points for each pull. When your credit information is pulled for reasons other than a credit application, the pull shows on your reports as a "soft inquiry" and does not impact your scores. These are some common situations that can cause a soft inquiry: A creditor pulls your information to send you an unsolicited offer You pull your own credit reports Your information is pulled to determine if you qualify for a non-debt product or service (e.g., rental unit, utilities, and insurance) It's natural to assume that all bills impact your credit scores. But the truth is, if it's not debt, paying a bill doesn't impact your scores. Here are some common bill payments that are not reported on your credit reports and have no impact on your scores: Rent Utility bills (including cell phone) Medical bills Subscriptions and memberships Rent-to-own agreements However, these types of bills can impact your credit if you fall behind on the payment and the bill becomes debt. If that debt is turned over to collections, and is reported to the credit bureaus, you will usually see a big drop in your credit scores. If you have problems with managing your bank accounts, such as overdrafts, bounced checks or unpaid banking fees, your credit scores will not be impacted. Problems with bank accounts can, however, hurt you in other ways. Issues with your checking or savings account can appear on your ChexSystems report or your Early Warning Services (EWS) report and make it hard for you to open new bank accounts in the future. Read more: Does closing a bank account hurt your credit score? Applying for new credit cards and loans can hurt your credit scores, since these applications result in hard inquiries to your credit. But if your application is denied, there is no additional damage. In fact, the opposite can be true. If you're approved for a new account, and you decide to open it, your scores can initially drop. That's because new accounts impact several factors that go into your credit score calculations, including your amount of debt owed and your average length of credit history. As a credit counselor, I often spoke to people who believed mistakes they had made decades ago were still hurting their credit. Fortunately, they were incorrect. The truth is that (with the exception of Chapter 7 bankruptcy) all negative information is removed from your credit reports after seven years. That includes missed payments and collection accounts. For Chapter 7 bankruptcy, the information is removed 10 years after the initial filing. The good news is that for any negative item you currently have on your credit report, the repercussions lessen with time. In other words, the older the negative information is, the less it impacts your scores. That's why it's important to add new, on-time debt payments to your credit reports if you want to improve your credit scores. Now that you know what's not included in your credit scores, let's set the record straight about what is included. According to FICO, these are the five categories of information used to calculate your credit scores, and how heavily each category is weighed: Payment history (35%): This refers to whether or not you make credit card and loan payments on time. Being late by 30 days or more can cause your scores to drop by as much as 100 points. Amounts owed (30%): This is how your credit card balances compare to your card limits, and how your loan balances compare to the original loan amounts. The smaller the balance in comparison to the limit, the better, especially when it comes to credit cards. Length of credit history (15%): Your length of history with debt accounts matters. In general, longer is better. If you want a perfect 850 credit score, you likely need accounts at least 30 years old. New credit (10%): Applications for new credit cards and loans have an impact. These appear on your credit reports as hard inquiries for two years, but only impact your scores for one year. Credit mix (10%): Your mix of different types of credit cards and loans plays a role. This category isn't very impactful, so it's not worth applying for a new account just to raise your scores. What's the most common myth when it comes to the five credit score categories? Many people incorrectly believe they need to get their credit card balance just below 30% of the limit in order to maximize their credit scores. But according to FICO, there is no magic number. However, the lower your balance, the better. On top of that, paying off your credit cards each month will help you avoid interest charges, late fees, and damage to your credit scores.

This map highlights the average credit score in every state
This map highlights the average credit score in every state

Yahoo

time6 days ago

  • Business
  • Yahoo

This map highlights the average credit score in every state

Your credit scores play a key role in your personal finances and daily life, from the interest rates you qualify for to whether you can rent an apartment or get approved for a loan. Think of a credit score like your financial grade point average: The higher your score, the better you appear to prospective creditors. But how does your score stack up against others in your state — or across the country? Here's a breakdown of the average credit score in every U.S. state, and what regional trends reveal about Americans' financial health. According to the latest analysis by Experian, the national average FICO credit score is 715 as of the third quarter of 2024. That average has remained the same since late 2023. That's great news for Americans, since a score within this range falls into the "good" category, which generally qualifies for favorable rates on loans, mortgages, and credit cards. Of course, this is just an average. Several factors can impact credit scores, and average scores vary across age groups, genders, and even states. According to Experian, the state with the lowest average credit score is Mississippi with an average FICO score of 680. Still, this falls within the lower end of the good credit score range. The state with the highest average credit score is Minnesota with an average score of 742. 'Everyone's financial situation is unique, which means a variety of factors can influence a person's credit score,' said Christina Roman, consumer education and advocacy manager for Experian. However, she noted that two of the most important factors are 'payment history' and 'credit utilization' (the amount of credit used compared to available limits). 'Payment history is especially influential, and missing even one payment can have a quick and significant negative impact on a credit score,' Roman said. Read more: How are credit scores calculated? Knowing your credit score is important because it directly affects your financial opportunities and overall financial health. So if it's been a while since you looked at your scores, take a few minutes to check in. There are several ways to check your credit scores, many of which are free. For instance, some banks and credit card companies offer free access to your credit score within your mobile app and/or online banking dashboard. You can also view your scores from each of the three major credit bureaus — Equifax, Experian, and TransUnion — which let you check your credit score for free and also provide optional services for a fee. Or you can sign up for a website such as Credit Karma or Credit Sesame, which offer free scores and also provide personalized insights and product recommendations to raise your score. It's important to note, however, that many free score providers give you access to your VantageScores, which are not used as often by lenders and likely vary from your FICO scores. If you want to see your FICO score specifically, you can sign up for the free version of myFICO and get access to your FICO 8 score from Experian. Read more: VantageScore vs. FICO: How these two major credit scoring models compare It's also important to understand that your scores may vary depending on the specific scoring model and what information has been reported to each bureau. Even so, checking one score will give you a general idea of where your credit stands. If your credit score isn't quite where you want it to be, there are steps you can take to move the needle in the right direction. This starts by identifying the factors that are driving your score down. Have you missed a few payments? Consider setting up automatic payments to ensure you're never late. Are you using too much of your available credit? Prioritize paying more than the minimum payment on your credit cards or requesting a credit limit increase to reduce the overall percentage of credit used. 'Improving your credit score is a marathon, not a sprint,' Roman said. 'It takes time and consistent financial habits, but the long-term payoff is a healthier credit profile and a stronger financial footing.'

Some New Yorkers who pay rent on time can increase their credit scores through a new pilot program
Some New Yorkers who pay rent on time can increase their credit scores through a new pilot program

CBS News

time6 days ago

  • Business
  • CBS News

Some New Yorkers who pay rent on time can increase their credit scores through a new pilot program

Some New Yorkers now have the opportunity to improve their credit scores just by paying their rent on time. The pilot program through Mayor Eric Adams' "City of Yes for Families" initiative is geared towards tenants who live in affordable housing and will reach about 500 households. Their rent payments will be reported to major credit bureaus through a free platform. This is all part of the city's "Where We Live" fair housing plan to help more New Yorkers become homeowners. The pilot program is expected to run for the next 15 months. Tenants can decide if they want to opt in. Pros and cons of rent reporting pilot "If this is reported to the credit bureaus, the three bureaus are keeping track, in a few months, you should see your credit score rise right away, so this is something that would take immediate effect," said economist Timothy Malefyt, with the Fordham Gabelli School of Business. Malefyt says transparent data practices are critical, however, and tenants should be fully informed about the risks and benefits. "What if a tenant missed payment and there's a late payment? This could adversely affect their credit score," he said. New Yorkers who spoke to CBS News New York saw pros and cons to the idea. "People living in apartments and does not get no reward for paying their rent on time," Harlem resident Ron R. said. "That sounds good for the people," Harlem resident DyQuan Norman said. "It's the political time of year so they gonna talk, talk, talk, but then it's totally different when it happens," Harlem resident Alisa Figueroa said.

FICO Scores to Include a Shopper's ‘Buy Now, Pay Later' Loan History
FICO Scores to Include a Shopper's ‘Buy Now, Pay Later' Loan History

New York Times

time24-06-2025

  • Business
  • New York Times

FICO Scores to Include a Shopper's ‘Buy Now, Pay Later' Loan History

How consumers use 'buy now, pay later' loans will be incorporated into one of the key metrics used to determine credit worthiness. FICO, the company whose credit scores are used by 90 percent of U.S. lenders, said it would start including a person's 'buy now, pay later' payment history in its all-important credit score. Currently these increasingly popular installment loans do not show up on credit reports, leaving banks with an incomplete picture of how much debt people actually have, along with their ability to pay it off. FICO, in a news release, said the growth of these loans led to its decision. Americans purchased more than $116.23 billion in goods and services using pay-later loans in 2023, up from $2 billion in 2019, according to Capital One Shopping Research. These loans have taken off because they offer a quick way to split purchases into smaller payments for consumers. Two of FICO's popular scoring models will begin integrating a consumer's history with these loans to give other lenders 'greater visibility into consumers' repayment behaviors' and a 'more comprehensive view of their credit readiness,' starting this fall. Though once reserved for big ticket items such as televisions, these installment plans are now being used by more people to pay for essential things like groceries and household utilities. And since an individual can take out multiple loans through a single financing later company, FICO determined a way to aggregate those loans for inclusion in its scoring models. In some cases, a person's FICO score could rise, the company said. Julie May, vice president and general manager of business-to-business scores at FICO, said the move would help shoppers using pay-later programs to establish a credit history. Want all of The Times? Subscribe.

FICO's new credit scores include data from BNPL loans.
FICO's new credit scores include data from BNPL loans.

The Verge

time24-06-2025

  • Business
  • The Verge

FICO's new credit scores include data from BNPL loans.

Posted Jun 24, 2025 at 8:19 PM UTC FICO's new credit scores include data from BNPL loans. The scoring models, which incorporate loan history from buy now, pay later services, like Klarna, Affirm, and Afterpay, will exist alongside FICO's standard credit score. FICO trained the models on over 500,000 BNPL loans from Affirm, and users with five or more loans 'typically saw their scores increase or remain stable,' according to the WSJ . However, the publication notes that credit bureaus still have to decide whether to share this information with borrowers and lenders.

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