Your credit score is a powerful number based on how you pay certain bills, like credit cards and loans. But, there are some financial transactions you make in daily life that have no effect on your credit score—good or bad. Here are 10 activities you don't have to worry about hurting your credit score.
Overdrawing your bank account can get expensive, especially if you have multiple overdraft transactions in a short period of time. Fortunately, those overdrafts won't hurt your credit score as long as you clear them up before they go to collections.
However, if your account remains overdrawn for several weeks and your bank ends up sending your account to a collection agency, your credit score will take a hit. This is because of the debt collection stemming from the overdrafted account, not the overdraft itself. The same goes for closing a bank account.
Information about your employer may be listed on your credit report, but your actual income is not. Creditors and lenders also use your income to decide whether to approve your application and how much you can afford to borrow. But having a high or low salary won’t directly impact your credit score. For example, a high salary won’t boost your credit score, nor will a low salary drag your score down.
Your salary might influence how you pay your bills, and payment history is included in your credit score.
Insurance companies check your credit score to decide whether to insure you and to calculate your insurance premium. Even though they use your credit score to make decisions about you, they don’t report your timely or untimely payments to the credit bureaus, so insurance payments won’t affect your credit score.
If you miss too many insurance payments, the insurance company will likely cancel your policy rather than send an unpaid balance to collections.
Child Support and Alimony
Child support and alimony payments won’t usually affect your credit score unless you fall behind on your payments and a collection agency has to get involved. In that case, your credit score could drop significantly. Not only that, you could be arrested and sued for the payments you missed.
Utility and Cellphone Payments
Like insurance companies, many utility and cellphone providers check your credit score before extending service. But these businesses don't routinely provide your payment information to credit bureaus. Your credit score isn’t helped by timely payments on your utility or cell phone bills. However, if your account becomes past due, it may be passed on to a collection agency who would then list the account on your credit report leading to a credit score drop.
In most cases, paying your rent on time won’t help your credit score. In fact, the FICO score would ignore the rental trade line even if it appeared on your credit report. On the other hand, falling behind on your rent could lead to an eviction, which would hurt your credit score and your ability to rent or get credit cards and loans in the future.
There is an exception: Some landlords may report payments to Experian RentBureau. In those instances, rent payments can help your Experian credit score.
Checking Your Own Credit
You can check your credit report or score as many times as you’d like and your credit score won’t drop a single point as long as you check it through a reputable source, like AnnualCreditReport.com, the credit bureaus, FICO, or a legitimate third-party. However, having a lender check your credit score for you would appear as a hard inquiry, which would affect your credit score the same as an inquiry for a new application.
Your Interest Rate
Your credit score influences your interest rate and not the other way around. Having high-interest rates on your credit cards and loans won’t hurt your credit score. Neither will low interest rates improve your credit score. But there could be a correlation between credit scores and interest rates since lenders typically give the best rates to borrowers with the best credit scores.
One of the myths about credit counseling is that it’s just as bad for your credit as Chapter 13 bankruptcy. That’s not true. Though credit counseling may be reflected on your credit report, it won’t hurt your credit score. If a credit counselor is managing your credit card payments, you must make sure your creditor is getting your payments on time. Late payments hurt your credit score even if they’re coming from a credit counselor.
Your age isn’t included in the credit scoring calculation, but there could be a relationship between your age and your credit score. If you’re young, chances are you don’t have much experience with credit, which could limit your credit score. Someone older with more credit history has time for early credit mistakes to drop off their credit report, so they could have a higher credit score.
Frequently Asked Questions (FAQs)
What is a good credit score?
A "near-prime" credit score ranges from 620 to 659. Above that are "prime" (600 to 719) and "super-prime" (at least 720) scores. Once your credit score falls below 620, you're considered a "subprime" borrower. You're considered a "deep subprime" borrower once you fall below 580.
How can you increase your credit score?
Increasing your credit score requires responsible long-term debt management. Unless your credit report contains an error that you can dispute, your score won't rapidly rise overnight. You'll have to continually keep debt low and make on-time payments. The longer you do so, the more your credit score will increase.