Common Questions about Credit Scores

FAQ: April 2017 Edition

Q: Does my income and overall net worth drive my credit score?

A: Not at all.

Q: What does account for my score?

A: Mostly it’s your record of paying installment and revolving credit on time, along with collection actions, civil judgments and tax liens lodged again you.  Bankruptcies, foreclosures, and repossessions also negatively impact your score.

Q: Is it true that the slate is wiped clean 10 years after declaring bankruptcy?

A: In general, yes.  But remember that on tax liens, for instance, the clock doesn’t start running when the creditor lodges the lien, but rather when it is released due to payment.

Q: Does paying my mortgage or car loan early affect my credit?

A: Unfortunately, no.  While it may be smart to do if you can, there’s no acceleration benefit from the perspective of your creditworthiness.

Q: Do potential employers look at my credit score?

A: Actually, no.  Some employers (more than half, according to surveys) rely on your credit history during the screening process, at least in those states where review is legal.  But they cannot get ahold of your actual score.  Nebraska presently allows employers to review credit history.

Q: What is the surest way to improve my score?

A: Paying down credit card debt.  Start with the account with the highest interest rate, and try to use no more than 10% of the credit limit on any account.

Q: Does paying off and closing accounts hurt my score?

A: Yes, it can cause your score to decline.

Q: Does paying credit card charges early help my score?

A: No.  There’s nothing on your credit report that shows when a bill is paid, only whether it was paid on time or not.

© Wesley H. Bain, Attorney at Law

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