7 questions to test your credit score knowledge

Updated: Dec 1, 2019




Having a good credit score is not the only requirement to be approved for mortgage and loan applications. These days, almost every aspect of life is contingent on it. Landlords, service providers, some employers, and even utility providers will draw your credit report to see how financially responsible you are. It follows then, that a number of financial decisions and actions will make an impact on your credit report. Do you know what they are? Let’s test your knowledge!


Missing a bill payment here and there will not affect your credit score.

  • False

  • True

Applying for several types of debt, such as credit cards and loans will hurt your credit score.

  • Yes, it will

  • No, it won’t

  • Yes and no

Your FICO score is the only one that counts.

  • False

  • True

Paying your rent on time will improve your credit score.

  • Yes, it will

  • No, it won’t

  • Only with some landlords

Not having a credit card improves your credit score.

  • True

  • False

Cancelling a credit card will improve your credit score.

  • False

  • True

Multiple types of credit will improve your score.

  • Definitely

  • Sometimes

  • Not really



Ready for your ‘score’? Let’s look at the facts:


Missing a bill payment here and there will not affect your credit score.

This is unfortunately false. While it may not seem like much of an issue, it is the number one factor in rating your credit. And don’t be fooled - it has a huge impact. For every payment that is 30 days late, you can expect to see a 90 - 110 point drop in your score.


That means that this is a big deal. We recommend you set up systems to remind yourself to make payments on time, every time, so you will avoid missing these critical payments.


Applying for several types of debt, such as credit cards and loans, will hurt your credit score.

Yes and No was correct! It all depends on your timeline, how new you are to the credit game, and what you are applying for. When it is a credit card you are applying for, this counts as a hard inquiry. For every application, in this case, you lose points. How many is hard to tell, since this is calculated based on other factors, such as the time between applications.


Multiple loans, mortgage, and student loan inquiries do not result in a huge loss of points since this counts as shopping around for the best interest rates. However, that only applies if these inquiries were made within a period of 30 days. It shows you are responsible!

Your FICO score is the only one that counts.

Maybe you knew this, but no. There is the very well known FICO score, but then there is also a collaboration by the three national credit bureaus, Experian, TransUnion and Equifax; called VantageScore. Because they use different rating systems, your score may vary slightly when compared.


Paying your rent on time will improve your credit score.

Guess what? This one is in your hands! When you pay your rent on time, every time, you can take advantage of Experian’s tool called Experian Boost™. This counts for utility and phone bill payments as well. Of course, the opposite is true. When missing payments on these, skipping on your lease and being irresponsible, you will be reported to the credit bureaus.


Not having a credit card improves your credit score.

Were you in the ‘stay away’ camp until now? You may want to reconsider your stance. Not having a credit card actually negatively affects your credit score, because having one adds to the diversity of your credit types. Managed responsibly, it can boost your credit score. Having a credit card with high credit, but using a small amount of that credit, immensely improves the way credit bureaus calculate your score.

Cancelling a credit card will improve your credit score.

Don’t do it! For the same reasons mentioned in the previous paragraph and more. The length of time you have had credit ads to your credit history - a very important metric in a good credit rating. The longer you have that credit card = the higher your credit age = the better your score. The minute you cancel your credit card, that metric just disappears, actually damaging your credit score.


Multiple types of credit will improve your score.

Definitely! This is called a credit mix and makes up 10% of your score. That is because, as mentioned earlier, varied credit types when managed responsibly show that you are a financially fit, responsible person. All of these depend on how well you manage your finances. When any of the above-mentioned information does not make sense in your unique financial situation, steer clear. As long as you are wise in managing your money, and you take good advice into careful consideration, you are likely to build a very strong credit score in time.



SOURCES:

https://www.northwesternmutual.com/life-and-money/how-do-i-build-my-credit/

https://www.myfico.com/credit-education/credit-reports/credit-checks-and-inquiries

https://www.forbes.com/sites/rent/2015/08/20/8-things-you-didnt-know-could-affect-your-credit/#1f55065421b7

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