Five Things That Surprisingly Don’t Affect Your Credit Score

By now, you’re probably well aware of how important your credit score is to your financial well-being and likely do your best to dodge potential threats to that precious number. Late payments, hard credit inquiries — you avoid them like the plague. It can be exhausting keeping up with all the factors that could impact your credit score, but knowing what doesn’t affect your number can make it easier to maintain it with less stress.

Believe it or not, there are a few things that, while important and closely related to your financial health, aren’t reported to credit bureaus and won’t result in a bad credit score. Hopefully, your quest for the highest credit score possible will be made a bit less stressful with the following knowledge:

INTEREST RATES

Though the affordability of the interest rates you obtain is based on your creditworthiness — the lower your score, the higher your rates — paying a high interest rate alone will not lower your score. This is also true if you own a high-interest credit card. You could have one with a 28 percent annual percentage rate, but as long as you pay your bill in full and on time your credit score will remain intact.

CREDIT COUNSELING

You don’t have to be in poor financial standing to obtain the services of a credit counselor, and even if you are, doing so will not have any affect on your credit score. Hopefully, it will do just the opposite, by helping you manage your debts and finances better.

Credit counseling used to be noted on credit reports and FICO would factor it into scores, lowering the number when instances of counseling were recorded. However, it was discovered that people were visiting counselors before they experienced financial troubles, so the formula was changed.

SOFT CREDIT INQUIRIES

It’s a common misconception that any credit check dings your score. Yes, applying for 10 credit cards in a week is going to negatively impact your credit, but a soft credit check by a potential employer will do nothing to your score. A soft credit check provides limited information to whoever is conducting it and doesn’t count as a full credit inquiry like one that would be performed by a creditor or lender.

INCOME

While income partially determines how much credit you are granted for loans and credit cards, your income itself has no bearing on your credit standing. You could make $10 a year or $1,000,000 — it doesn’t matter so long as you’re making good on your financial obligations.

The only time your income will impact on your credit score is when it does not meet your spending needs — or rather, habits. If you spend more than you earn, you will see your credit score suffer.

PAYMENT PLANS

Signing up for payment plans to pay off big-ticket items won’t result in any damage to your credit score so long as you never miss a payment. For example, sometimes event tickets, products and appliances are available for purchase with a payment plan that breaks up the total cost into more-manageable installments. It might seem like a trap, as you’re technically carrying a balance while you pay off the item. However, these plans are not reported to a credit bureau and do not result in an impact to your credit score the way carrying a balance on a credit card does. This also applies to items you purchase during the year-end shopping season on layaway.

With so many people crippled by debt, foreclosures and unemployment, it’s nice to know there are a few things that won’t impact your credit. Even so, neglecting these areas of your finances could end up negatively influencing your credit score indirectly. Practicing responsible financial behaviors like limiting spending, paying bills on time and periodically reviewing your credit report should keep that number healthy.

This article appeared in print in the December 29th, 2014 edition of Hamodia.