7 factors that do NOT impact your credit score

By Jodi Helmer

You may know that credit card balances, payment history and recent credit inquiries can cause your credit score to sink or soar. But when it comes to the three-digit number that has an impact on everything from your ability to rent an apartment to the interest rates on loans, there are a lot of misconceptions.

Before you set out to boost your credit score, keep reading to uncover which seven financial and lifestyle factors have no impact on your score.

1. Your income
The algorithms used by the three major credit bureaus -- Equifax, Experian and TransUnion -- do not use the earnings on your W-2 form to calculate your credit score. In other words, a barista could have the same credit score as an NBA star.

"Lenders will use your income as part of the overall evaluation of your creditworthiness, but income is not factored into your credit score," says Rod Griffin, director of public education for Experian. "Just because you have the financial resources doesn't mean you manage debt well; there are a lot of millionaires who don't pay their bills."

However, a higher income might make it easier to erase debt, and a history of paying off debts will impact your credit score, so go ahead and ask for that raise.

2. Your assets
Own a Lamborghini and a house in the Hamptons? Your assets might impress a lender, but they are not used to calculate your credit score.

"The credit bureaus don't have access to information about personal assets," says Anthony Sprauve, director of public relations for myFICO, the consumer website for the company that creates the famous FICO scores.

Both outstanding debt and payment history are factored into your score. In other words, making on-time payments toward a loan on a sports car or paying off a mortgage will improve your credit score.

Since lenders do often request information about your assets, a portfolio that includes savings and investment accounts and real estate holdings -- along with a solid credit score -- will make it easier to get a loan.

3. Interest rates on current loans
There is a link between credit scores and interest rates: The higher your score, the lower your rate. But you're not graded on your past loans' rates.

Borrowers with scores between 760 and 850 would qualify for a 3.060 percent interest rate on a 30-year fixed mortgage while borrowers whose scores fall between 620 and 639 would qualify for rates of 4.649 percent, according to myFICO.

If your loan's rate was on the high side, it could be because your credit was lousy, but it could be for more benign reasons, too. You might have borrowed the money long ago, when rates were higher. Or maybe you ran into a fast-talking loan peddler who suckered you into signing up for a lousy deal. You're smarter now, right? Well, the algorithm credit bureaus use to calculate scores is pretty smart, too. It ignores the rate.

"Your interest rates on loans have no impact on your ability to repay the loan," notes Sprauve. "But a higher score indicates a higher likelihood of repaying a debt, which means a lower [interest] rate."

4. Working with a credit counselor
Consumers who struggle with their finances fear that participating in credit counseling will impact their score, leaving them with another hurdle to overcome.

"Credit counseling does not affect your credit score," says Jana Castanon, community outreach coordinator for the national nonprofit consumer credit counseling agency, Apprisen. "Working with a credit counselor can give you the tools to manage your debt and pay your bills on time and that can protect your credit score."

There are instances when credit counseling can have a negative impact on your score: Clients who close accounts to minimize their available credit or settle debts for less than the total amount owed will suffer from a drop in their scores. According to Castanon, a temporary drop in your credit score is worth it to take control of your finances.

5. Checking your credit score
Credit bureaus differentiate between consumers who are checking their own scores, and lenders and creditors who check credit scores before making loans or extending new credit.

"Inquiries [by lenders or creditors] do count against your score because they show that you are looking to borrow money or secure additional credit," says Castanon. "But there is no impact from requesting your credit report or checking your own score."

In fact, Castanon encourages clients to request free credit reports through AnnualCreditReport.com and, if they plan to apply for credit or loans, to purchase their credit score to gauge their likelihood of qualifying.

6. Marital status
A marriage certificate or divorce decree might impact your finances, but don't expect getting hitched or parting ways to nudge your credit score up or down. Your sweetie can still have an effect on your credit score, though.

"Once a joint account is opened, whether it's a mortgage or a credit card, both parties are equally liable for the entire debt," says Sprauve. "If one person misses payments, it impacts both scores. You sink or swim together."

7. Demographics
In the State of Credit survey, researchers at Experian found that credit scores were highest among certain demographics, including women, those over age 66 and residents of the Midwest.

While the correlations between credit scores and age, gender and geographic location are interesting, credit bureaus do not use those factors to calculate credit scores.

"There are fair lending laws that prohibit collecting that kind of data and using it to make lending decisions. It would be unfair and unreasonable to base credit scores" on demographic information, Griffin says.

See related: FICO's 5 factors: components of a FICO score

Published: January 3, 2013

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