Six Common Credit Questions

CreditRepair_Logo_FullColor_RGB was founded, in part, because for the average person, credit scores can be needlessly complicated and difficult to understand. It’s difficult to keep track of what affects your credit score, how to manage and build credit, and even why it all matters. Our members ask us questions on credit daily – here are some of the most common questions we’ve received:

Who Sees My Credit Score?

Generally, companies can check your credit score when you apply with them for a financial service, such as a loan or a credit card. Examples include banks, credit card providers, and lenders. Some landlord and property companies check the credit scores of potential tenants, as well.

This is the reason credit scores are important – they directly affect lending decisions, and in some cases, can determine the interest you’ll have to pay on a loan.

Does Income Affect My Credit Score?

No. Credit reports do not include income, and so your salary does not factor into the equation. In fact, you could earn six figures a year and still have a terrible credit score, or earn minimum wage and have an excellent credit score. In theory, a higher salary means you can more easily manage your finances, and so salary could affect your credit score in that way – but if you have trouble managing your finances, it will be reflected in your credit report no matter your income.

Does Checking My Score Impact My Credit?

Checking your score does not affect your credit. Only hard inquiries – the ones initiated through a loan or credit application – affect your credit score. Your personal credit score checks are soft inquiries, and do not have an impact.

I Have No Credit History – How Can I Start Building Credit?

The best way to start building credit is to gradually increase the amount of personal financial accounts you hold (within reason and affordability, of course). A good way to start is with a secured credit card – a credit card that is tied to a security deposit. You make monthly payments, just like a normal credit card, but the credit card company can use your deposit should you default. This way, credit card companies reduce their risk when lending to a person with no credit history, and you can start building a history of timely payments.

Another good method is to co-sign on a loan with a trusted and responsible person – like a family member – who can help you qualify for a loan. Of course, this means that your failure to make payments could hurt your co-signers credit, so be certain that both of you understand the consequences and risks before signing.

Should I Close Old Credit Cards?

You should be careful closing old credit cards. You should consider keeping open credit cards that have a high credit limit or that you have held for a long time. This is because your amount of available credit and age of your accounts factor into the calculation of your credit score. That said, if you have trouble managing credit card debt, and need temptation removed from your wallet, you should go ahead and close out the “dangerous” ones.

Why Do I Have Multiple Credit Scores?

There are several different methods for calculating credit scores, and many companies and credit bureaus that report them. The most commonly used credit bureaus are Equifax, Experian, and TransUnion – and your score could be different for each bureau! This is because often, not all financial data is reported to all three bureaus. In addition, the lender checking your credit score can use several different scoring models based on the criteria that they deem most important.

Unfortunately, this means that you can never be 100% sure that the number you see and the number your potential lenders see is the same. The best method is to pick a credit bureau’s score – or all three, if you prefer – and monitor that score over time. That way, you can at least know whether your credit score is tracking up or down.

Posted in Credit 101
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