There are a lot of elements that constitute your credit score, possibly more than you may know. You’re aware that your credit score has a direct impact on your ability to take out a loan, and that it’s primarily based on your ability to make timely payments on your debts and services.
But there’s more to it than that. Check out the items below and see if they include things you don’t know about your credit score and all that goes into it.
- Only Financials Impact Your Credit Report
Though you may be accustomed to your age, marital status, income, and other personal facts playing a role in your ability to obtain certain goods and services, your credit report does not depend on any of those. Only your financials can affect your credit score, and not all financial factors will be taken into account.
Your income, for example, has no bearing on your credit. This means even fabulously wealthy people do not automatically have a better score than those of us who have more conventional income levels — and vice versa.
Instead, your score is calculated on the basis of payment history of open accounts, such as credit cards, loans, rental agreements, and the like. Demographics such as age, race, geographic location, religion, occupation, and other facets of your life have nothing to do with it.
- You’re Not Stuck with Bad Credit Forever
If your credit drops to an unfortunate low, it’s not stuck there forever. It will take time and effort, of course, but you can bring your score back up to an acceptable or even optimal number if you use the right tactics.
The first and most important step for repairing your credit rating is to maintain a consistent pattern of making all payments on time. After a couple of years of doing so, your credit will return to respectable levels, and you can take out a loan and qualify for other substantial transactions.
You can also seek the help of credit repair services that analyze your situation and offer special advice. It’s worthwhile to note, however, that credit report details and the repair process can vary by state. If you live in Washington, for example, you’ll want to look into Washington-based credit repair services to ensure that you make proper reparations.
- The FCRA Limits Access to the Report
By law, you don’t have to show your credit report to everyone. This is important to know because you might try to do business with a housing office or another unauthorized entity that demands your credit score before they’ll let you sign a contract.
According to the Fair Credit Reporting Act (FCRA), most third parties who request access to your credit score will need written permission before they can see the report. Some entities can gain access to your credit report without your permission, however. They include:
- Insurance companies
- Child support agencies
- Government organizations
- Credit card companies
- Collection agencies
Knowing this information can arm you to protect your rights in certain situations. In others, it may be beneficial to reveal your credit report in order to get the deal you want. If you have good credit, for example, it doesn’t hurt to show it to a landlord or potential employer in order to advance your position with them.
- It’s Not Always Free to Check Your Credit Score
According to the 2003 Fair and Accurate Credit Transactions (FACT) Act, once a year, you can request a free credit report from major credit bureaus like TransUnion, Experion, and Equifax, but you’ll often have to pay to see the score itself. Unfortunately, when a bill was brought before Congress to allow consumers free access to their own reports, it didn’t include a proviso for the credit scores too.
Sometimes, your financial institution will allow you to see your credit score when you’re applying for a loan or upon request. However, you’ll usually have to pay for your official FICO credit score at myfico.com.
- Closing Accounts Can Hurt Your Score
If you’re trying to dodge having to make payments on an account, closing it won’t get you there without hurting your score. Your account can stay on your credit report after it’s been closed for up to 10 years.
Any outstanding late payments will still be due, and your failure to pay will result in worse credit. Always make sure any account is paid in full before you close it.
In addition, your credit score can be improved by keeping accounts open for a lengthy period of time. If you close multiple accounts early, even if they’re paid in full, it can be bad for your credit, because it suggests a lack of commitment that will affect your score.
- Credit Reports Can Make Mistakes
Though it’s not common, mistakes can be made in your credit report. A financial institution or other account servicer may report inaccurate information, and damage your score.
For that reason, it’s essential to check your credit report regularly. Study the information carefully at least once per year to ensure accuracy across the board. You’d never want your credit to suffer because you failed to catch somebody else’s mistake.