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Dissecting Credit Score – Here’s What You Need to Know

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Credit Reports are Historical

Plain and simple, a credit report is a historical record of your use of credit. Other than your credit history, a credit report retains information from applications. Each time you complete a credit application, that information is stored as self-reported. None of the information is cross-verified by each agency. This makes room for errors as well as the compilation of superfluous data.

It’s wise to check your report and correct the history, even that history that is not calculated into the FICO score.


Is all Debt Reported?

  •  Any debt you owe, if it comes to the hands of a professional collections agency will appear front and center, even if the original creditor did not share the information. Lots of small accounts, the cable bill, your wireless service does not make it to your credit report unless you fail to pay, and a collections company takes over.


  • Medical debt is not supposed to be reported. However, most unpaid medical bills quickly move into a collection agency’s hands and show up at breakneck speed on your report. However, some states have made attempts to block medical debt to show up on the credit report. But just beware, when a collection agency is brought into the mix, strange things are bound to happen.


  • When you buy anything, like a home, and the seller is the lender—or for most any private loan—nothing will appear on your credit report. Credit reporting requires that the creditor have a membership or contractual relationship with each credit reporting agency. Most individual lenders do not qualify and do take the time to officially report.


  • Your faithful, timely payment of apartment rent will not show up unless you act and pay a service that handles and verifies posting the historical record. This is a relatively new concept. RentTrack is one such service where the big fat check that becomes due every month can find its way into the credit reports. Here is how it works.


  • Debit cards and pre-paid cards have no role in credit and appear nowhere on credit reports.


  • Another important thing, unpaid parking tickets as well as many municipal or city-based bills have an odd way of appearing on your report. Don’t avoid paying them.


What appears on one report may not appear on all reports

Just because one report shows it does not mean the others will. Some smaller banks will only use one report. A mortgage, on the other hand, will likely show up on all three.


Spouse, Parents, Children’s Credit…

Your spouse’s credit is a different profile than yours. That said, if you are co-signers on all the items, then you may well end up with similar scoring issues. In theory, if you are authorized user, your score is not affected.


Criminal Activity is not Credit Activity

A credit report should not be confused with a criminal record. Criminal activity is not a part of your credit profile. If, however, any criminal activity resulted in a judgment for money against you…. well that judgment might appear.


Civil Judgments are front and center

If you file bankruptcy, the federal filing will stay on your report for a minimum of 10 years. The impact of a bankruptcy on your ability to get credit is beyond the scope of today’s article.  But just to let you know, the footprints of bankruptcy stays on for 10 years on the credit report, and then most likely you will need to dispute the item to have it cleared.

Civil judgments will appear if they have been properly filed.

Delinquent Child Support will appear in most cases. This could be a collection item, a judgment, or a simple line item. This reporting varies often by state and depends upon how old the collection item might be.


How does my Income affect my Credit Score?

Income does not have a direct relationship with your credit score. You report your income on an application. The place of work and position will be stored whereas income or salary information is not stored and is not a part of your credit history. Income and expenses clearly factor into whether you will be approved for many loans, but income is not reported. Net Worth, Income, Title or Position at employment, whether you are/are not actually employed, are not verified and do not appear unless reported by you. If you are fired, that fact also is not reported. To be clear, any application will ask you these questions. And, so the information hits the report. But, credit reports are not verified by an army of investigators looking for information.


What is not included on your credit score

There is more than a single factor that is used to build your credit score and explain to lenders your level of creditworthiness. However, while you might expect some of the things included, most people are surprised when they learn about the other factors that are actually not included in your credit score.

These are…

1. Marital status

It doesn’t matter whether you are married or single. Your credit score is your own. This means that even if your partner has a poor credit score, it will not affect you in any way and you can still receive loans if your credit score is good.

However, a point to note is that if you are applying together for say, a mortgage, both your scores will be considered.

2. Income Level

This is perhaps one of the most surprising factor that is not included in your credit score. Think of all the times you’ve had to apply for credit. In almost all instances, you were asked to put in your income level.

However, there is a good reason why income is not a reliable way to determine your ability to pay back the debt. Having a high-income level and not being willing to pay your debts is far worse than having a smaller income and paying your dues.

3. Age

Being older likely means that you’ve had plenty of time to build up your credit score provided you’ve been doing things the right way. However, while your age will be listed on your score, it doesn’t in any way affect it.

You can still be young and honor the few debts you have and still manage to have an excellent credit score.

4. Geographical Location

In the United States, your credit score will not be affected by where you live. It’s important to note that different countries use different criteria for determining your credit score. If you are planning on relocating to another country, keep this in mind that their system will most likely be different.

5. Assets

If you have loans for certain assets such as your mortgage or car loan, this will show on your credit report. However just like with your income level, having such assets is not indicative of someone’s ability to pay back their debts. Assets are therefore not included on your credit score.

6. Paying someone else’s bills

You might want to do a friend or family member a favor by paying their debts thinking that it might boost your own credit rating. The truth is, it will only boost the person you are paying for. If you want to cater to someone’s debts, do it from the kindness of your own heart.

7. Searching for rates

Most people will temporarily apply for multiple loans trying to find the best rates available. The good news is that there is no harm to this and most systems will actually calculate all of the inquiries as a single loan especially if they are all done within a span of a few weeks. This will not affect your credit score in any way.


Concluding Thoughts!

There are several items to consider when building, maintaining or re-building good credit. Focus on good clean information is key to a foundation. Ideally, this article gives you some guidance into where the information comes from as well as what information does not belong. The big picture is that you obtain credit, use it, and pay on time. At the same time, there is value in keeping the other data clean.




Read NextHow To Increase Your Credit Score?


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