Smart Quiz: Which of the Following Does Not Impact Your Credit Score
- Car Loans
- Student Loans
Of all the times people might worry about their income, they shouldn’t when they are looking at their credit score or report. Income history doesn’t show up or factor into your credit report or score.
Credit reports are just indicators of past trustworthiness when it comes to financial obligations. In fact, you can still have a great credit score with little to no income. Likewise, you can have a seven figure income and a very poor credit score.
Lenders typically evaluate credit score, existing debts, payment history, the number of inquiries, public records and existing credit available in a credit report. Then, they compare the borrower’s debts to income to see if they appear to be able to afford the payments on a new line of credit. However, they get the income information from the borrower in the form of records and sometimes just by asking them.
Sure, your income matters when you want to apply for a new line of credit, but without debt it doesn’t effect your score. For the best credit score, make payments on time, avoid applying for unnecessary credit, and avoid using all of your credit. Lenders like to see borrowers using less than 30 percent of their available credit.
Income doesn’t show on a credit report, but can still be used to improve credit scores. Plan your budget so that your income works for you and your credit. Pay more than than minimum payments, save for purchases rather than adding them to your credit accounts and live within your means. Then, enjoy the benefits that a great credit score can bring!
~Here’s to Your Financial Health!