16 things that don’t hurt your credit score

A guide to sorting out FICO’s complex credit scoring formula

Brady Porche
Staff Reporter
Focusing on credit scores and what consumers can do to improve them

16 things that don’t hurt your credit score

 

If you miss a rent payment, it won’t hurt your credit score – unless your landlord reports your late payment to a collection agency.

FICO’s traditional formula for calculating your credit score is often misunderstood by consumers, giving rise to numerous myths. For example, many believe that you must carry a small balance on at least one of your credit cards to maximize your credit score. That’s not true – you won’t hurt your credit score by keeping a zero balance on all of your cards.

Of course, if you never use a credit card, your issuer may opt to close the account. However, that account will stay on your credit report for 10 years, but the length of your credit history will decrease after that, potentially lowering your credit score.

Confused yet? If so, carefully review this list of 16 things that won’t damage your credit, broken down within each of the five components that make up your scores. (Also see this list of 18 things that hurt your credit score.) 

What doesn’t hurt your credit score


Payment history
35%


  • Not paying your balance in full each month
  • Paying off an installment loan
  • Keeping a credit card for a long time
  • Late rent, utility and cellphone payments
  • Medical debts less than 180 days past due
  • Failing to pay back a loan from a family member or friend
  • Losing your job
  • Disputing a charge or other item on your credit report
  • Overdrawing your checking account
  • Getting help from a credit counselor
  • Entering a debt management plan
  • Receiving government assistance

Credit utilization
30%


  • Not paying your balance in full each month
  • Paying off an installment loan
  • Letting your credit cards collect dust

Length of credit history
15%


  • Keeping a credit card for a long time
  • Letting your credit cards collect dust
  • Entering a debt management plan

New credit
10%


  • Soft inquiries
  • Home loan rate shopping
  • Being denied or not accepting credit

Credit mix
10%


  • None

1. Soft inquiries.
A soft inquiry is any credit pull that doesn’t result from you applying for credit, such as when you order a copy of your credit report or check your credit score. Other examples include credit card issuers and lenders checking your credit for promotional purposes or to review accounts you have with them.

2. Home loan rate shopping.
Home loan interest rate shopping generates several hard inquiries, but FICO’s formula ignores home loan inquiries over a 30-day “buffer” period. The formula also uses a process called “deduping” to count all loan inquiries within a set time frame – typically 45 days – as a single inquiry. Your credit report should show only one hard inquiry from securing a home loan. 

3. Not paying your balance in full.
Your credit score won’t suffer if you carry a small card balance from month to month. However, it’s best to keep your card balances low to minimize your credit utilization ratio.

4. Paying off an installment loan.
Paying off a mortgage, car loan or student loan shows prospective lenders you are a responsible borrower who can manage different types of credit.

5. Keeping a credit card for a long time.
FICO’s scoring model favors long-held credit accounts, especially if they’re in good standing.

6. Late rent, utility and cellphone payments.
Cellphone service providers and landlords generally don’t report payment information to the bureaus. However, overdue rent, cellphone or utility payments can hurt your credit score if they’re sent to a collection agency.

7. Medical debts less than 180 days past due.
Beginning in September 2017, unpaid medical debts will not appear on credit reports until 180 days past due. The rule is designed to protect against credit damage resulting from insurance payment delays.

8. Failing to pay back a loan from a family member or friend.
Individuals can’t furnish payment information to the credit bureaus.

9. Losing your job.
Lack of steady income can prevent you from getting a credit card or a loan, but your job status is not a factor in your credit score. FICO does not consider your salary, occupation, title or employer.

10. Being denied or not accepting credit.
Applying for a new credit card or a loan generates a hard inquiry on your credit report. However, it does not reflect whether you were denied or you refused the applied-for account.

11. Disputing a charge or error on your credit report.
If you dispute a charge or an incorrect item on your credit report, it will not negatively affect your credit

12. Letting your credit cards collect dust.
An idle credit card does not hurt your credit score. However, if the issuer closes the card due to inactivity, that will hurt your score due to the loss of that credit line and the overall shortening of your credit history.

13. Overdrawing your checking account.
This information is not included in your credit report.

14. Getting help from a credit counselor.
This information is not included in your credit report.

15. Entering a debt management plan (DMP).
This will not affect your score, and a DMP could even help it by improving payment history and reducing debt, but cards may be canceled in the DMP and may already be listed as having late payments, which will hurt your score.

16. Receiving government assistance.
The Consumer Credit Act prohibits credit scoring models from considering a consumer’s receipt of government assistance.

See related: Loan can boost score faster than balance transfer deal, Will removal of civil judgments boost my credit score? 


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Updated: 11-20-2017