Wednesday, December 18, 2013

Plenty of things can help your credit score – such as paying down debt – while other things can hurt it. But not everything is positive or negative, noted credit.com advisor Christine DiGangi. Some financial situations just don’t matter in the financial world.

To clear up some common misconceptions, DiGangi points to five financial situations that will not impact your credit score:
 

• Using debit instead of credit – Debit cards offer many of the same conveniences as credit cards, like online payments and the ability to shop without carrying cash. For consumers looking to improve their credit scores, debit cards won’t help, while responsible use of a credit card will. But debit cards have their advantages: There’s no bill to pay later and spending is limited to the amount of money in the account. Using a debit card instead of credit now and then will not adversely affect your credit score.
• A drop in income – A pay cut or job loss may negatively affect your standard of living. But your income is not part of your credit report, and your score won’t suffer as long as you continue to pay your bills. However, lenders do consider your debt-to-income ratio when approving you for certain types of credit. So if you apply for credit soon after a drop in income, this may affect your ability to get approved, even if it doesn’t hurt your credit score itself.
• Credit rejection – Applying for credit results in a credit inquiry, which can lead to a slight drop in scores. But whether you’re approved or denied has no bearing on your credit score, so while you should avoid unnecessary inquiries, getting denied doesn’t shave extra points off scores. (However, you should find out why you were denied. Ask for a free copy of your credit report in such instances to help you understand what part of your credit profile is hurting you.)
• Not using your credit card –It’s never a bad idea to put the credit cards away for a bit while you pay down balances and lower your credit utilization rate. A brief hiatus from credit card use won’t ding your scores – and could help if you significantly improve your debt-to-credit ratio. But don’t close accounts or leave them dormant so long that the issuer closes the account for you. That will diminish your available credit and could ding your scores as a result.
• Getting married – While your future spouse’s credit score is worth noting, marrying him or her isn’t going to hurt your credit score. A spouse’s low score could hurt your chances of getting joint credit in the future, but just the simple act of signing a marriage license isn’t going to harm the credit score you have earned.

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