The good folks at Kiplinger recently posted a quiz about what actions affect your credit score. Let’s see how well you score on these variations of their questions.
Question: When shopping at your favorite store, you open a new credit card to receive a 15% discount on your purchase. Will this increase or decrease your credit score?
Answer: Opening new consumer credit accounts will likely lower your score in the short run. Why? FICO says that people with six or more credit inquiries on their reports in a short period are eight times more likely to declare bankruptcy than those with no inquiries.
Question: When you marry, does your credit score get mixed with your new spouse’s credit score?
Answer: No. Credit scores based on an individual’s accounts remain tied to that person. However, once you start opening joint accounts the credit usage will affect the score for both of you.
Question: When you forget to pay a parking ticket, or a library overdue fine, will it change your credit score?
Answer: Not necessarily, but if the agency sends you to collection for the unpaid bill it will drop your credit score.
Question: When you shop for a home loan and each lender wants to run your credit, do the inquiries drop your credit score?
Answer: No. As long as mortgage loan inquiries are run within 45 days of each other, it counts as one inquiry. And inquiries only make up 10% of your credit score. It’s the multiple consumer credit account inquiries that will do damage, as above.
Question: When you lose your job, your credit score falls.
Answer: False. Employment is not part of the credit scoring model. Neither is gender, marital status, or age. Credit scores are designed to track how you use credit, not where you get the money to make the payments.
Tammy Engel is your local Mortgage Advisor, and has been working for your best interest since 1990. Contact her at 661/822-REAL with your home loan questions about purchase, refinance, and reverse mortgage.