I get asked the question “How is my FICO score calculated?” very often. There are many common misconceptions about information that is gathered to make your score. Many people believe personal details and factors weigh against them. Let’s clear it all up here –
- First off, your FICO score doesn’t consider race, religion, national origin, sex, color or marital status. They don’t care if you are purple or blue, if you believe or you don’t, or even who you shack up with behind closed doors. Seriously. Plus, it’s illegal – more specifically, its part of the Truth in Lending Act under the Consumer Protection Credit Act.
- Your age or where you live. Whether you’re fancy or in a one bedroom apartment with three people. It’s cool – they don’t consider it. Can your age technically affect your score? Well sure, it will affect the age of your accounts. They consider credit history age though not your personal age.
- Your salary, occupation, employer, or employment history. Many people believe that because Credit Karma asks you to fill out how much money you make annually that it must make your score lower or higher. Nope. They ask for marketing. Their revenue comes from marketing credit cards to you.
- Also, some types of inquiries: Specifically those that you ask for through a monitoring service. Promotional inquiries on your credit; ie – any pre-approved offer that comes in the mail doesn’t count against your score. If your employer did a background check and pulled your credit, that doesn’t count either.
- They don’t look at interest rates you get charged. Car loan is 18.99%? Credit card is 7.50%? Doesn’t matter. They are interested in how you pay those bills, not the rate you were charged to borrow the money.
Many things are considered when building your score, but the above is not. Plus, it’s the way it should be – your score should be based on the facts of your credit file and accounts. Not on your employment, your living situation or what your interest rate is on a loan. Don’t you think?