Your credit score tells lenders a lot about you, like how well you pay your bills on time and how responsible you are when it comes to managing debt. FICO scores, Beacon scores and Plus scores are all calculated using different criteria and people often have misconceptions about what they are. Knowing what does and doesn’t impact your score can help you avoid any potentially damaging mistakes. Here are six things that won’t help to improve your credit.
1. Getting a raise
When you’re applying for a mortgage or car loan, one of the things lenders will look at is how much money you make. While a higher income can improve your chances of getting approved, it doesn’t by itself help to increase your credit score. Taking a pay cut or losing a job also won’t affect your credit but it may cause lenders to take a second glance if your ability to pay your bills comes into question.
2. Tying the knot
Contrary to popular belief, getting married doesn’t in itself cause your credit score to go up. You and your spouse still maintain your individual credit histories and the only way one affects the other is if you take out loans jointly. As long as the account is paid on time you each benefit but if one of you is responsible for paying the bill and misses a payment, both your scores take the hit. The same is true if you add your spouse as an authorized user to an account that’s in your name only.
3. Getting divorced
Just like getting married doesn’t directly affect your credit score, neither does getting divorced. In fact, it could even cause your score to go down once you part ways. If you’re on the hook for debts that you and your spouse racked up together or bills your former spouse incurred in your name, you’ll have to pay to avoid damage to your credit. Even if the divorce decree states that you’re not responsible, the lender can still come after you as long as your name is on the account.
4. Using debit instead of credit
Debit cards make paying for purchases convenient and they’re also a good way to avoid racking up debt but when it comes to your credit, they don’t hurt or help you. A debit card is tied your checking account, which means that you’re not borrowing anything so there’s nothing to pay back. Opting for a secured credit card instead gives you the same convenient access to your money while also improving your score. Just keep in mind that secured cards typically have a high interest rate and a hefty annual fee.
5. Closing old accounts
Closing your old credit card accounts not only doesn’t help your score, it can actually hurt you in the long run. Your FICO score, for instance, is based in part on the length of your credit history. Specifically, it looks at how long your oldest account has been opened, the age of your newest account and the average combined age of all your credit lines. If you close one or more accounts that have been open for awhile it shortens your overall history, which can cause your score to drop.
6. Saving money
Having a wad of cash socked away in the bank can certainly help you sleep easier at night but it won’t cause you credit score to rise. Scoring models generally don’t consider your savings account balance when it comes to weighing your creditworthiness. Lenders, however, will take a close look at your assets when gauging whether to approve you for a loan. If you have a significant amount in savings but roughly an equal amount of debt, you’ll see more of an impact on your credit if you use the cash to pay off your balances for good.
If you’ve been trying to work on your credit but haven’t been seeing much in the way of results, it could be because you’re focusing on the wrong things. Paying your bills on time, keeping your balances low and limiting how often you apply for new loans are the easiest ways to maintain a good score.
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