While there are five overarching factors that influence your FICO credit score, the detailed specifics underlying each are not well understood since providers shroud their proprietary scoring models in mystery. The unintended outcome is that some people misunderstand what factors matter when building credit.
In the video segment below, Fool analysts Michael Douglass and Nathan Hamilton talk about three things not counted in your credit score. How many caught you by surprise?
Michael Douglass: So, Nathan, the internet is a big place.
Nathan Hamilton: A big place.
Douglass: It's huge. It's full of a lot of information, some good and some bad. I think there's a lot of misconceptions about credit scores. Let's talk real quick about things that are not counted in your credit score. One of the big things that I think a lot of people don't know about -- in fact, this surprised me -- demographic information.
Hamilton: Yeah. If you think about it, your demographics be it sex, age, gender, income... those aren't actually reported in your credit score. It's just a matter of OK, am I paying my bills on time, am I using debt wisely? Those are the factors to pay attention to. Just for me being a white male, it's not going to impact my credit score at all.
Douglass: Yeah. I would have kind of assumed that income would matter at some point. Right? It gets pulled for so many other things, but it doesn't.
Hamilton: Yeah. Not specifically for a credit score, but if you are applying for a credit card, if you are applying for a mortgage obviously, they're going to ask for your income in addition to pulling your credit score.
Douglass: Sure. Paying rent on time is not something that's counted, although there's a caveat, so let's talk about that.
Hamilton: Yeah, a big caveat. Your credit score will not be impacted by on-time payment. So if you are savvy about that, if you are paying on time, unfortunately, it's not going to do anything to increase your score, but very quickly you can make it decrease by missing payments because there are instances where a missed rent payment is going to be reported to the credit reporting bureaus. The bureaus then use that data, and your score is calculated from that information.
Douglass: Right. So generally speaking, pay your bills on time. Not groundbreaking commentary there from us but still a good thing to think about. Then let's talk about child support and alimony as well.
Hamilton: Yeah. Child support and alimony isn't something that's going to impact your score because if you look at it, it's just a matter of looking at things that specifically will tell FICO who is a scoring provider about what your credit history is. Child support and alimony doesn't really do that just as demographics don't. If we look across the criteria that is used within FICO scores, it's just not a factor that's going to impact it.
Douglass: Cool. You know, we've got a lot more information on credit cards, credit scores, debt management, budgeting at fool.com/creditcards so check us out there. Hamilton, thanks much.
Hamilton: Thank you.