What Affects Your Credit Score

7 Questions Home Buyers Need To Know The Answers To


Your credit score is a three-digit number that mortgage lenders look at to review your credit worthiness. This number is important because if your credit score is on the low side, you might only qualify for a mortgage with a higher-than-average interest rate. Unfortunately, if it’s too low, you might not qualify for a mortgage at all. In general, lenders consider FICO scores of 740 or higher to be top scores.

Before you go house hunting, it might be time to order a copy of your three-digit credit score. You can do this from any or all of the national credit bureaus of Equifax, Experian and TransUnion and they may charge you to view your credit score. Each bureau’s credit score will vary slightly, but they should all be in the same basic range.

Many credit card companies and some banks also provide you with a credit score alongside your monthly statement. You can keep track of your score on a regular basis with this easy and free access.

Once you have your score, it’s time to determine if you need to take steps to gradually improve it. It’s important, then, to understand what affects your credit score.

#1 Does Your Income Affect Your Credit Score?

No! The credit reporting agencies of Equifax, Experian and TransUnion do not include your salary on your credit reports or use this information to calculate your credit score. Keep in mind that lenders do require a certain income level to ensure you can pay back your mortgage each month.

#2 Does Your Employment Status Affect Your Credit Score?

No! Your job history and employment status are not part of your credit report and aren’t used to calculate your credit score. That being said, mortgage lenders are unlikely to approve you for a home loan if you’re between jobs.

#3 Does Your Payment History Affect Your Credit Score?

Yes! Consistent, on-time payments for your bills including mortgages; auto, student and personal loans; and credit cards are recorded. If you pay late (30 days or more), your credit score will be affected. Ensure that your bills are paid on time and for the amounts indicated.

#4 Does The Amount Of Money You Owe Affect Your Credit Score?

Yes! If you max out your credit cards and have no available credit, you may appear to be a poor risk to mortgage lenders. Work to pay off your debts and try to keep credit card balances under 30% of the available credit.  For example, if your credit card limit is $5,000, try to charge no more than $1,500 at one time on that card. It makes solid financial sense to pay off all credit card balances in full each month.

#5 Does The Length Of My Credit History Affect My Credit Score?

Yes! The credit bureaus will look at how long accounts have been open and how long it’s been since your last transaction on these accounts. But, don’t fret if your credit history is relatively new. The more weighty matters are your payment history and how much debt you’re carrying.

#6 Does The Type Of Credit I Have Affect My Credit Score?

Yes! Your credit score includes the type of credit you have such as retail credit cards, national bank credit cards, personal and home loans, auto loans and student loans in your credit mix. Again, your payment history and debt load are weighted more than your credit mix.

#7 Does New Credit Affect My Credit Score?

Yes! If you go on a spending spree and open up several new credit cards in a short amount of time, or take on a lot of new debt with a car loan and/or other personal loan, your credit score can be adversely affected. Consider how much credit you need and can realistically repay before you apply for every credit card offer.

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