With all the talk about the importance of maintaining a clean credit history and keeping your credit score high, there is, understandably, always a lot of attention paid to what sort of behavior and financial situation can result in your score taking a hit. These things can range in scope from filing for bankruptcy to falling delinquent on your mortgage payments to maxing out one or more of your credit cards. However, consumers who are concerned about cultivating a high score often times worry needlessly about things that, in fact, have no bearing at all upon their FICO score such as:
Your Employment Status
If you get laid off from a job that does not mean your credit score will dip. While it is not uncommon for people who lose their job to suffer a lowering of their credit score this is due to their falling behind on payments as a result of the loss of income, not because of the job loss itself. So even if you have to squeak by on unemployment benefits for a while as long as you can pay your bills on time your credit score will be fine.
Because you just learned that your employment status has no bearing upon your score, it should not come as a huge surprise that how much you earn has no effect upon your score, either.
Having a big bank account balance will not make you seem more appealing to lenders because they do not factor in how much you have saved when evaluating your credit worthiness. In a roundabout way, though, your savings can impact your score because if you have an emergency fund in place you can use it to help you not fall behind on your bills should you ever encounter financial hard times. Also, if you are in debt using some money from your savings to pay it down will ultimately lead to a positive impact upon your score.
If You Pay Down Your Credit Cards Within The Issuer’s Billing Cycle
A huge portion of your credit score – 30% – is determined by your credit utilization ratio or, in other words, how much debt you have compared to your amount of available credit. In this case, the lower, the better. A credit score is essentially a snapshot of your credit situation at the exact time a lender decides to check it. So if you previously believed that revolving a balance from month to month was advantageous to your credit score realize that the only thing it does is cost you money in terms of interest. Also, if you max out your card during the month it is bad for your credit utilization ratio – even if you pay it off again before the billing cycle ends.
The Value Of Your Home
Should the value of your home drop suddenly, you needn’t worry that your credit score will drop too. The FICO scoring formula does not include your home’s current market value.