Credit Scores: 9 Things That Don’t Matter, 5 That Do

Nearly 1 in 6 people believe race and gender affect their credit score, according to a study published last month.

The study by Visa reveals a lot of mistaken assumptions people have about their credit scores. For something that affects our ability to get everything from a home or car loan to a job, life insurance, and a decent credit card, it literally pays to understand what’s going on. But 42 percent of Americans don’t even regularly check their score, the study says.

In the video below, Money Talks News founder Stacy Johnson takes on some of the biggest myths about credit scores. Check it out, and then read on to find out how they really work – and what you can do to raise yours.

Stacy didn’t cover the whole list of myths in the survey. Here’s what folks believe about their credit scores, at least according to Visa. Those surveyed think scores are affected by…

  • Employment history: 59.9%
  • Interest rates on debt: 58.7%
  • Assets / savings: 53.1%
  • Age: 38.6%
  • Where you live: 25.3%
  • National origin: 21.6%
  • Ability to speak English: 21.6%
  • Gender: 17.2%
  • Race: 15.7%

But none of these factors has the slightest effect on your credit score. It would be illegal for Fair Isaac (the company that calculates FICO scores, by far the nation’s most popular) to consider some of these factors — things such as race, religion, birthplace, gender, and marital status. If you’d like to see a complete list of things they explicitly ignore when calculating your credit score, you can check it out here.

That’s not to say nobody cares about such things as your income and work history. A landlord or loan officer will likely want to know about your salary and employment history. But as a component of your credit score? Not relevant.

What does count

Raising your credit score may not be easy, but the factors behind it are no secret. In fact, Fair Isaac explains exactly what factors influence your credit score. They even weigh each factor for you…

  • Payment history (35%) – This is your track record of paying back what you borrowed. Accounts in collection, late payments, and bankruptcy are bad; paying on time for a long period is good.
  • Amounts owed (30%) – This is based on the total amounts you owe, and the ratio of what you’re allowed to borrow to what you currently owe, called your “utilization ratio.” Maxing out your credit hurts it; keeping a lot of unused credit available helps it. Ideally, you want to keep your utilization ratio below 30 percent. So if you have a credit card with a $1,000 limit, you’d want to keep your balance below $300.
  • Length of credit history (15%) – This considers the length of time each credit account has been open, and when each account was last updated with payment or usage info. As you might imagine, the longer your history, the better. This is why if you’re going to cancel a credit card, all things being equal, ditch the newest and keep the oldest.
  • New credit (10%) – This includes recent inquiries and requests for credit. Regularly applying for new credit cards or other loans will cost you.
  • Types of credit used (10%) – There’s all kinds of credit out there, from revolving (credit cards) to installment (car and home loans.) Fair Isaac likes you to be well-rounded and sample them all. In short, diversity helps.

Finding out your score

You can get a free copy of your credit report from AnnualCreditReport.com. A report from each of the three major reporting agencies – TransUnion, Experian, and Equifax – can be accessed once a year, so stagger them four months apart and you can stay on top of your credit all year long for free. But these reports won’t give you your score, just the background information agencies like Fair Isaac use to calculate it.

Since your credit score is of vital importance, you’d expect to able to get a free look at it now and then. But you can’t – at least not Fair Isaac’s. They charge you $19.95 to see it. Why can’t you see your score without cost? I’ll let Stacy explain from this post he did last year:

Since your credit score is obviously super-important, and is derived from your personal credit history, you may feel justifiably confused by why you should have to pay 20 bucks to see it. The explanation for that I can summarize with one word: lobbying. The financial services lobby in this country is one of our democracy’s most powerful. To get a fair shake for consumers in virtually anything has always been an up-hill battle. In the case of getting a free look at your credit report, for example, it took years. In the case of being able to see your credit score, it hasn’t happened yet.

Fair Isaac’s isn’t the only credit score around – there are sites like Credit Karma that will hook you up with a free score, but it’s not Fair Isaac’s FICO score. You can sometimes get a free FICO score if you’re turned down for credit, which isn’t the best option. You might also try to get one gratis by applying for a free Fair Isaac credit monitoring trial and canceling within the 10-day trial period.

Raising your score

The path to a good credit score is obviously paying your bills on time, all the time, for long periods of time. That being said, however, there are a few steps you can take to try to get faster results.

1. Fix errors. Get your free credit reports and look for errors – they’re more common than you might think. If you find mistakes, challenge them. This page of the FTC website tells you exactly what to do.

2. Try to get bad marks removed. You can also try to have negative remarks removed from your credit history, even if they’re accurate. It’s not easy, but it’s been done. Stacy explains what to do, and offers a sample letter, in this post.

3. Lower your utilization ratio. As mentioned above, maxing out your credit lines raises your utilization ratio and lowers your credit score. Bring your ratio down by paying down debt, increasing credit lines, or shifting balances. Learn more in 3 Tips to Raise Your Credit Score – Fast.

How to earn $30 in less than 30 seconds

Earn extra money by using Rakuten (formerly known as Ebates) — a site that gets you cash back at more than 2,500 stores. As a bonus for joining Rakuten between now and Aug. 6, 2020, you'll earn $30 when you spend at least $30 shopping online through Rakuten within the first 90 days. Start earning cash back and claim a free $30 bonus today.

Read Next
How to Invest in Real Estate for as Little as $500
How to Invest in Real Estate for as Little as $500

If stock market volatility has you looking for other investment options, here’s a way to diversify — even if you don’t have tons of money.

8 Key Steps to Planning for Retirement as a Couple
8 Key Steps to Planning for Retirement as a Couple

Ready for retirement? Not so fast. You might be surprised at some of the issues that come up for couples when they plan.

5 Ways to Put an End to Junk Mail
5 Ways to Put an End to Junk Mail

Here’s how to keep unwanted mail from clogging your mailbox and trash can.

5 Upgrades That Help Seniors Grow Old in Their Own Homes
5 Upgrades That Help Seniors Grow Old in Their Own Homes

Are you planning to “age in place”? These safety-conscious home renovations can help.

14 Service Providers Most Likely to Lower Your Bill If You Ask
14 Service Providers Most Likely to Lower Your Bill If You Ask

With these companies, it might be easier than you think to negotiate your monthly bill down.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
Will I Get My Ex-Husband’s Social Security When He Dies?
Will I Get My Ex-Husband’s Social Security When He Dies?

Two factors determine how much money is coming to you.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

16 Amazon Purchases That We Are Loving Right Now
16 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

22 Things You Should Always Buy at a Dollar Store
22 Things You Should Always Buy at a Dollar Store

The dollar store has great bargains on these purchases.

5 Household Disinfectants That Can Destroy the Coronavirus
5 Household Disinfectants That Can Destroy the Coronavirus

You likely already have some of these products at home.

20 Things That Are Actually Worth Stockpiling
20 Things That Are Actually Worth Stockpiling

You probably don’t need a year’s supply of toilet paper to survive an outbreak, but consider stocking up on these items.

6 Reasons I Will Never Trust Suze Orman
6 Reasons I Will Never Trust Suze Orman

Beware: The self-proclaimed personal finance expert has a track record that suggests more sizzle than steak.

America’s Most Reliable Appliance Brand Is a Surprise
America’s Most Reliable Appliance Brand Is a Surprise

Have you heard of this appliance manufacturer?

The Top 11 Jobs That Employers Want Retirees to Do
The Top 11 Jobs That Employers Want Retirees to Do

Tired of age discrimination? Businesses are clamoring for older workers to fill certain roles.

This Type of Social Security Benefit Is Often Overlooked
This Type of Social Security Benefit Is Often Overlooked

The Social Security Administration is not helping certain people get money to which they are entitled, a report says.

9 Everyday Problems You Can Solve With Vaseline
9 Everyday Problems You Can Solve With Vaseline

Forget expensive specialty products. Good ol’ petroleum jelly can address many common annoyances.

Getting These 2 Shots Could Reduce Your Risk of Dementia
Getting These 2 Shots Could Reduce Your Risk of Dementia

These vaccines may lower the risk of Alzheimer’s disease by up to 40%.

19 Purchases That Buyers Almost Always Regret
19 Purchases That Buyers Almost Always Regret

Think twice before buying these things.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

8 of the Worst Things to Buy at a Dollar Store
8 of the Worst Things to Buy at a Dollar Store

Not everything sold at dollar stores is a great bargain or a safe purchase. Here’s our list of products to avoid.

41 Things You Should Never Buy
41 Things You Should Never Buy

Some purchases are just plain dumb. Give yourself — and your budget — a break. Don’t spend money on this stuff.

9 Things That Are Free in August
9 Things That Are Free in August

As summer enters the home stretch, we’ve rounded up these sizzling freebies.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.