5 Things that Won't Boost Your Credit Score

There's so much focus on what you can do to improve your credit score, but it's also important to know what won't help it.

Jun 22, 2014 at 12:49PM

Who doesn't want a better credit score? Many consumers spend considerable time trying to gain precious points in the hope it will result in lower interest rates and better credit terms. However, there are many misconceptions about how your credit score is calculated and what actions will make an impact on your score.

"Your credit score is based on your contents of your credit report," says Gail Cunningham, National Foundation for Credit Counseling vice president of membership and public relations. "Only financial information and activities, such as new credit cards opened, loans taken out, late payments and accounts closed are reported to credit bureaus, thus becoming part of your credit report."

Here are five things that won't increase your credit score.

1. Making more money
You may think your credit score will increase when you get a raise or that having a high salary has a positive impact on your score. But in fact, salary is not a factor at all in your credit score.

"The whole point of a credit score is how well you manage your credit," says Cunningham. "People who make more money often spend more or manage their money very poorly."

2. Certain credit report inquiries
When you apply for new financial services, the resulting "hard" inquiry is an indication that you may have taken on new debt that has not yet had time to be reported as an account, and a recent inquiry can cause a small decrease in your scores, says Maxine Sweet, vice president of public education at Experian.

"But, you can review your own report as many times as you want because it creates a 'soft' inquiry which can be only be viewed by you and is never scored," Sweet says. "This is also true for inquiries for employment, insurance, account monitoring and preapproved offers."

3. Closing unused or old credit card accounts
Closing old accounts is a strategy that many people use to try to increase their score. However, most of the time it actually has the opposite effect and can lower your score.

"Part of your credit score is how long you have had credit, so if you close one of your older accounts then your score will drop because you have a shorter length of credit," says Anthony Sprauve, senior consumer credit specialist at FICO. "It also lowers your amount of credit available which lowers your credit-utilization percentage, thus potentially lowering your credit score."

If you have cards you are not using that are free of fees, Sprauve suggests simply tucking them in a drawer and forgetting about them instead of closing the accounts.

4. Use of a prepaid card or debit card
While using debit cards and prepaid cards can be a good way to learn how to responsibly manage your money, your responsible use of these cards has absolutely no impact on your credit score.

"If you are trying to rebuild your credit and cannot get a traditional card, consider getting a secured card instead of using a debit or prepaid," Cunningham says. "If your intent is to raise your score, be sure to ask your issuer if the secured card is reported to the credit bureaus."

5. Opening a lot of different types of credit accounts
There is a misconception that to have a good credit score you need a variety of different types of credit, such as a line of credit, mortgage, car and credit card.

"In reality, you can have a great FICO score by having only one account and managing it responsibly," Sprauve says. "The number and variety of accounts does not have an effect."

This article 5 Things that Won't Boost Your Credit Score originally appeared on Wise Piggy.

Your credit card may soon be completely worthless
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

You may also enjoy these finance articles:

5 things we all need to know about credit scores

7 credit score 'facts' that are plain wrong

An overview of credit scoring models

Wise Piggy has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers