With the national Credit Card Delinquency Rate the lowest it’s been in 17 years, consumers have been making a conscientious effort to be more responsible with their credit.
But a recent TransUnion survey reveals consumers are largely confused about what affects their credit score and what is included in their credit report. In fact, nearly half of all consumers falsely identified rental (45 percent) and cell phone (47 percent) payments as those that directly affect their score; however, these are not regularly reported to credit bureaus.
While consumers who frequently review their credit report incorrectly identify some aspects of it, consumers who rarely or never review their credit report have an even higher level of confusion. Among survey respondents who reported checking their report in the last 30 days, half mistakenly believe their full employment history (55 percent) and income level (41 percent) are included in their reports.
In addition, the survey found that most consumers are not taking basic measures to stay informed about their credit report, such as checking it regularly or signing up for a credit monitoring service.
Noteworthy points of confusion about what affects a credit score and what information is included in credit report include:
- Pay raises: Nearly half (48 percent) of respondents who’ve checked their credit report in the last year incorrectly believed an increase in income improves their score.
- Employment and income information. Among survey respondents who reported checking their report in the last 30 days, half mistakenly believe their full employment history (55 percent) and income level (41 percent) are included in their reports.
- Credit inquiries: 40 percent of respondents who’ve never checked their report are unsure how it affects their score, and 20 percent who checked their report in the last year mistakenly believed checking their report would decrease their score.
- Paying down debts: 61 percent of those who checked their report in the last 30 days erroneously believed paying off debts from late payments automatically increases their score.
- Trended information: 70 percent of those who’ve checked their report in the last year incorrectly assumed that it reflected recent changes or trends in their finances over time.
Things that affect your credit score positively:
- Paying your bills on time and in full.
- Using 30 percent or less of your available credit. Ideally, you should carry a balance of no more than $3,000 if your credit limit is $10,000.
- Steady employment. People who are steadily employed are viewed as being better able to pay their bills on time.
Things that affect your credit score negatively:
- Late or missed payments
- Using more than 70 percent of your total amount of available credit
- Liens or foreclosures
- Too many requests for new lines of credit
- Periods of unemployment
Main Factors That Affect Your Credit Score
- Your payment history. One of the most important factors to a potential lender is whether or not you will pay your bills in full and on time. The more recent your good (or bad) payment history, the more important it will be for your credit score.
- Your outstanding debt.. As mentioned above, try to keep your credit card balances at 30 percent or less of your limits.
- The length of time you’ve been building credit. The longer your credit history, the higher your credit rating.
- The number of soft or hard inquiries on your credit report. Soft inquiries typically occur when a person or company checks your credit report as part of a background check. Hard inquiries generally occur when a financial institution, such as a lender or credit card issuer, checks your credit report when making a lending decision. The more times you’ve applied for credit cards or loans, the more credit report inquiries will show up on your credit report. A higher number of credit report inquiries may indicate that you’re struggling financially or may have a lot of debt (even if you never used the cards or gotten the loans).
To help consumers better understand their credit score and report, TransUnion has debunked the following six myths:
TransUnion has provided me with compensation for my time and efforts on this article. As always, all opinions are 100% my own.
Information is a powerful thing. At TransUnion, we realize that. We are dedicated to finding innovative ways information can be used to help individuals make better and smarter decisions. We help uncover unique stories, trends and insights behind each data point, using historical information as well as alternative data sources. This allows a variety of markets and businesses to better manage risk and consumers to better manage their credit, personal information and identity. Today, TransUnion reaches consumers and businesses in more than 30 countries around the world on five continents. Through the power of information, TransUnion is working to build stronger economies and families and safer communities worldwide.