There is a lot that goes onto your credit report ? it?s a veritable report card on your financial life, if you will.
Your history of paying loans, whether or not you max out your credit card and how long you?ve had different accounts, plus a myriad of other details relating to your financial history are on your report and can affect your credit score and access to credit.
But there are a lot of other things that have traditionally not made their way onto your credit report, even though you might have assumed (or hoped) they did. Responsible practices like always paying your rent on time basically go unrecognized. On the flip side, there?s some negative information that you might think could harm your credit but actually has no bearing on it.
There?s a push right now to consider more types of information (such as utility and cable bill payments) when calculating credit scores as a way to bring into the fold more people who have little to no traditional credit history. For instance, Fair Isaac Co, which calculates the FICO score that is used in some 90% of consumer lending decisions, is currently testing an alternative score that would make millions more people creditworthy.
Alternative lenders (like Earnest, Upstart and Pave) are also proliferating, which take tons more information into consideration when evaluating a potential borrower.
So what?s left out of the traditional credit score equation? Here are some of the more surprising things:
1. How much money you make.?Nowhere on your credit report will you find your salary. Nor does a high salary mean you have a good credit score or a low salary mean your credit score is in the toilet.
Still, your income can indirectly impact your access to credit and your credit score.
For instance, a credit card provider will ask you for your income. Then they?ll use it in conjunction with your credit report to decide whether or not to give you a card and what the terms are going to be. A higher income in relation to your debts might get you a higher credit limit, since the bank figures you?re more likely to be able to repay what you spend.
With a higher income, you?re also more likely to have an easier time keeping your financial house in order. By having sufficient income to always pay your credit cards and loans on time, for instance, you?re helping your credit score.
2. Your net worth. It doesn?t matter if you have an outsized savings account and investment portfolio, the keys to a million-dollar mansion in the country and a 50-foot yacht. It does matter if you took out loans to bankroll a lavish lifestyle and had a spotty track record of making payments. (See: 7 Ways You?re Ruining Your Credit Score)
3. An Ivy League degree?(or lack thereof). There is no place on your credit report where you?ll find your alma mater, no matter how prestigious. You will find your employer?s name, but that doesn?t get factored into your credit score, either. (These things do, however, matter to some of those alternative lenders.)
4. Your debit card. When you use a debit card or prepaid card, your activity is not reported to the credit bureaus and therefore is not helping to build your credit. Checks and cash don?t count, either. Only by signing up for a credit card and proving that you can use it responsibly will you improve your credit score simply by paying for things.
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