Certain aspects of money management are good for your financial health, but have nothing to do with your credit score. Not directly at least. Check out five important parts of your finances that don’t directly affect your credit score.
The amount of money you make
Your income isn’t one of the primary factors that goes into your credit score. So, whether you make a little money or a lot, your credit score won’t be affected. However, the amount of money you make does impact whether you can pay your bills and that’s something that does affect your credit score.
How long you’ve been on your job, or whether you’re employed at all
Lenders do look favorably at stable employment, but your credit score won’t go down if you lose your job and it won’t go up if you get job. But, like your income, your employment status can affect the timeliness of your bill payments.
Your savings or retirement account balances
Your credit score doesn’t take into account the amount of money you have in any bank account. Having no savings or a lot of savings won’t hurt or help your credit score. But, having access to savings can help save your credit score if you’re ever in a financial bind.
Whether you pay your utility bills on time
Your monthly credit card and loan payments are the only bills that are normally factored into your credit score. While you have other incentives for paying your cable and other monthly services on time – like keeping your services – timely payments won’t help your credit score. If you fall behind, on the other hand, the companies may report you to the credit bureaus or send your debt to a collection agency who’ll report to the credit bureaus.
Your debt-to-income ratio
Your debt-to-income ratio shows how much of your income is going toward debt payments each month. While it is a strong indicator of your financial health – a high debt to income ratio shows that you’re spending a lot of money on debt – the ratio doesn’t impact your credit score. Debt can affect your credit score. Your credit score considers the ratio of your credit card balances compared to the credit limit – and that does affect your credit score.
Even though these things don’t directly affect your credit score, they’re still important for your overall financial success. And any neglected area of your finances has the potential to indirectly hurt your credit score.