What’s NOT Included in your Credit Score

When you’re preparing for a big purchase, you might start worrying about your credit score and what could bring it down. There are quite a few factors that go into calculating your credit score, but some of the omitted factors may surprise you.

Here is what you can expect to be considered when calculating your credit score, and also what’s NOT considered.

Your Credit Score

There are five main components that make up your credit score. These include:

1.    Your current debt, whether it’s from credit cards, auto loans, or student loans.
2.    Your payment history and whether you’ve consistently made or missed those payments.
3.    What types of credit you utilize. The type of loan will be listed and is important, because some types aren’t actively being repaid, such as student loans.
4.    The length of your credit history, because a very high score from someone who hasn’t had a credit card for more than a few months does not reflect their ability to responsibly handle debt.
5.    New forms of credit you’ve opened, because recently opening a bunch of credit cards or personal loans is a bad reflection of your financial responsibility if you’re applying for a mortgage or other large loan.

What’s NOT Considered

Now that you know what factors definitively make up your credit score, here are some factors that do not go into calculating your credit score, and some might surprise you.

1.      Your income. Although the lender of a loan will ask what your income is, it is not used to calculate your credit score.
2.    Interest rates. Although these are often determined by your credit score, your credit score does not take your interest rates into account.
3.    Your demographics. Your age, marital status, location, and race are not important when it comes to your credit score. Again, some of these may need to be known when applying for a loan, but your credit score is not affected.
4.    Rent. Most landlords and rental agencies do not report to credit bureaus, but if you have a good history of making your payment on time you can sometimes ask that they do report it to establish a more solid credit history.
5.    Child support. If you pay child support it will not affect your credit score unless you are significantly behind on payments.
6.    Promotional Offers. If you notice you get a lot of preapproved offers for credit cards or personal loans, it’s probably because these companies do a soft pull of your credit report, but don’t worry – these don’t affect your credit score. They’re just annoying.

Knowing how your credit score is calculated gives you a better idea of how your financial history and decisions impact your opportunities, and can help you set goals toward improvement.