14 Surprising Facts About Credit Scores You Probably Never Heard

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Credit scores can affect you more than you realize, especially if it concerns taking out loans. Whether it’s a bank, an auto dealer, or even a credit card company, your credit score can determine how much these institutions are willing to loan you and your interest rate. A good credit score often points to being financially responsible, which can increase your chances of getting a loan. Therefore, this three-digit number must be properly managed and maintained. These are 14 surprising facts about credit scores you probably never heard:

Personal Background Doesn’t Affect Your Credit Score

It can come as a significant surprise to many people who don’t know it, but many factors in your background do not affect your credit score. Factors like marital status, age, salary, occupation or employment history, and whether you receive public assistance are not considered when determining your credit score. The credit score is impacted by other factors that are more related to your finances and financial activities than your details.

Payment History Affects Your Credit Score the Most

One of the most significant factors determining your credit score is your payment history. This history reveals how you repay funds that have been loaned to you and are usually determined by different factors like whether you pay bills on time, have any pending debt settlements, lawsuits, etc. Most people do not realize that your payment history affects your credit score even more than the amount you may owe to others.

There Are Different Kinds of Credit Scoring Models

One of the most common credit scoring models that are used is the FICO score. However, in addition to the FICO scoring model, other credit scoring models also exist to help determine your credit score, like the VantageScore model, the Experian PLUS Score model, and others. These models use different kinds of algorithms and criteria that they consider to help calculate credit scores. However, they all share one thing in common: to measure how likely you would be able to back a loan.

One Person Can Have Multiple Credit Scores

The existence of multiple scoring models can lead to one person having more than one credit score. Your FICO credit score can be one number, which may not match your VantageScore credit score. Some lenders may prefer the model you use to calculate your score, while others may prefer a different one for calculating your credit score. Therefore, it is good to keep track of your scores with different scoring models, as it can increase your chances of getting a loan.

Your Credit Score Is Not Static

Many individuals believe that once you manage to get a good credit score, it will remain that way throughout your lifetime. However, your credit score is never static and can change more often than you realize. Your credit scores change also with your financial behavior, and the more frequently your financial behavior changes, so will your credit score. Fluctuations in the credit score occur based on factors like your payment history, credit utilization, credit inquiries, etc.

Your Credit Score Can Be Used For Multiple Reasons

Although one of the significant uses of a credit score is to determine agreements made within a traditional loan, your credit score can also be used for multiple other reasons. Often, landlords, utility companies, and insurance companies want information about your credit score to assess risks and determine different service terms. Therefore, it is generally recommended that you maintain a good credit score.

Employers Cannot Check Your Credit Score

Sometimes, employers looking to hire new employees ask for information about their credit score as a part of the hiring process. However, employers cannot access your credit score and are not entitled to know what it is. While they may be able to go through your credit report with your permission, the actual information about your credit score does not have to be disclosed to them. Potential lenders, landlords, utility companies, and insurance companies can only check credit scores.

Closing A Credit Account Can Impact Your Score

This may be a surprising revelation to many individuals who learn for the first time that closing a credit account can impact your credit utilization ratio and average account age, which can, in turn, lower your credit score. However, this impact on your credit score is only for the short term, and you can work on the other factors that majorly affect your credit score to bring it up again.

Your Income Is Not Included In Your Credit Score

Although your income can play an essential role in your financial situation and history, it is not a factor considered while calculating your credit score. Therefore, a lower income will not impact your credit score. Instead, your credit history and financial behavior can significantly impact your credit scores, as these factors are generally considered across different credit scoring models.

Credit Scores Can Be Used For Security Clearance

Although employers do not have access to your credit scores during the interview phase for a job, your score can play a significant role during the security clearance phase for a job. This applies to government jobs and other jobs that require high security. Your credit score provides insight into your financial stability, which can be essential when assessing someone’s reliability and trustworthiness. It may provide important information to employers, however credit scores are not the only factor taken into consideration for security clearance.

Your Monthly Payments Can Impact Your Credit Score

How regular you are with your monthly rent and utility payments can play a big role in determining your credit score. Not all credit bureaus may take stock of these payments, but timely payments can make all the difference in some credit scoring models. If you want to improve your credit history, making timely payments on all your monthly bills can be a good way to start, as it can reflect positively on your overall credit score.

The Age Of Your Account Can Influence Your Credit Score

Many people are surprised to learn how the age of your bank account or credit account can influence your credit score. Many scoring models consider the length of your credit history as an essential factor while calculating your credit score. Older accounts that reflect a positive payment history can positively contribute to your credit score, while a newer account without any payment history may not have anything positive to add.

Joint Accounts Affect Both Parties’ Credit Scores

Many partners or couples open a joint account for reasons including convenience for the family. However, a fact you may not know is that the credit scores of all the parties involved in the joint accounts, whether it is a joint mortgage or a joint credit card, are often affected by the account. This means that payment histories, balances, etc., on these joint accounts can even play an important role in the individual credit scores of the people who share the joint account.

Credit Inquiries Can Affect Your Credit Score

Credit scores can be checked for multiple reasons. If you undertake a soft inquiry on your credit score, your credit score is not affected, no matter how frequently you do it. However, a hard inquiry is typically performed on your credit report when you apply for a loan or new credit. Even if this inquiry is performed only once, your credit score is lowered by a few points. This is temporary, and you can take measures to increase your credit score again.

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