10+ credit score facts most Americans don't know | finder.com

10+ facts about credit scores that most Americans don’t know

Did you know you've got more than one credit score? Also, don't close that old credit card account just yet.

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In 2018, the average credit score in the US is just under 700. But how much do Americans really know about credit scores?

Before we put in our two cents, scroll down our list of credit score facts and see what you know — and what you don’t. So, without further ado, here are some of the most surprising facts that most Americans aren’t aware of when it comes to their credit scores.

1. There are 5 factors that can impact your credit score

If you’re trying to maintain or improve your score, you should know what piece of the pie these five factors account for when calculating your score:

  • Payment history (35%)
  • Account balances (30%)
  • Credit history length (15%)
  • Types of credit (10%)
  • Credit inquiries (10%)

2. A credit report isn’t a credit score

Sure, they’re associated with one another, however, your credit score is determined by the information in your credit report. Your credit report is a breakdown of your credit management activity — payment history, open and closed accounts, debts you have, your credit limits and more. All of those factors come into play when calculating your credit score on a scale from 300-850.

Interested in what your credit score is?

Updated September 19th, 2019
Name Product Starting price Trial period Credit scores Credit monitoring Credit reports Update frequency
$19.99
30 days
TransUnion
Equifax
Experian
Yes
TransUnion
Equifax
Experian
Monthly
Annually
Get your credit report and FICO score for just $1 with enrollment in Experian CreditWorks credit monitoring. Cancel anytime.
$19.95
1 day
TransUnion
Equifax
Experian
Yes
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Equifax
Experian
Monthly
Get quarterly access to your most widely used FICO® Scores and a 3-bureau credit report.
$24.95
No
TransUnion
Equifax
Experian
Yes
TransUnion
Equifax
Experian
Monthly
TransUnion credit score, monitoring and identity theft insurance.
$15.95
No
TransUnion
Equifax
Experian
Yes
TransUnion
Equifax
Experian
Monthly
Monitor your key business relationships to protect your company from losses.
$19.95
7 days
TransUnion
Yes
TransUnion
Monthly
$1 for a seven-day trial to get access to your credit score and credit report from TransUnion.

Compare up to 4 providers

Updated September 19th, 2019
Name Product Monthly Fee BBB Rating Customer Support Cancel Anytime
$25
A
Phone
Email
Online Chat
Yes
Save money and build credit with a secured-installment loan that you can access after 12 or 24 months.
$99.95
F
Phone
Email
Mail
No
Specializes in clearing your credit report of inaccurate items with all three credit bureaus.
$19
A+
Phone
Email
Yes
Get a free consultation to help identify erroneous items on your credit report.
$89.95
F
Phone
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Yes
Law firm that offers three tiers of credit repair suited to your situation.
Credit Firm Professional Credit Repair
Credit Firm Professional Credit Repair
$49.99
A+
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Mail
Yes
Professional credit repair service that can help you create a step by step action plan. Cancel anytime.
$79
C
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Mail
Yes
Professionals work with you to clean up your credit and raise your credit scores. Cancel anytime.
$79
C
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Free credit report and monitoring that comes with a 90-day money-back guarantee.

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3. The credit scoring system was founded in the 1950s

That’s a long time ago, however, credit scores didn’t actually catch on until the 1970s. Before Bill Fair and Earl Isaac came along and founded FICO, to get approved for credit you’d have to meet with a banker or lender face to face and convince them that you were a trustworthy borrower.

4. Your credit score impacts more than your ability to borrow

Looking to rent apartment? Don’t be surprised if the landlord asks to run a credit check to see your credit score to gauge how you’ve managed your finances in the past. Also, lower credit scores tend to go hand in hand with higher car insurance premiums.

And while employers can’t check your credit report without your permission, your credit score is one of the factors they may be interested in when researching potential candidates.

5. Maxed credit cards can damage your score

Have you heard the term, credit utilization ratio? This refers to the balance you have on a credit card compared to the limit.

Let’s say your limit is $2,000 and you have a balance on $1,500 — you have a 75% credit utilization ratio. That could potentially drop your credit score if your credit report is ran while that balance sits on your card. Experts recommend to keep your credit utilization ratio under 30%.

6. Credit scores weren’t designed for consumers

Credit scores were implemented to help lenders make calculated decisions on whether to approve or deny a consumers application for credit.

So that means your credit score matters a whole lot — especially if you plan on applying for a credit card, or taking out an auto or home loan in the near future.

7. You probably have more than one credit score

It’s not as confusing as it sounds. There are three nationwide credit reporting bureaus — Equifax, Experian and TransUnion — and they all may have slightly different information on your credit file.

8. It’s possible for you to have no credit score

Not everyone has a credit history, in fact, the Credit Financial Protection Bureau reports that 1 out of 10 American adults are credit invisible. If you think you might fall into that statistic, don’t fret, there are steps you can take to build your credit history to get on the radar.

9. Closing your accounts can lower your score

The longer you’ve had an account open, the lengthier your credit history. If you were to close your oldest account, you could possibly see your score drop a few points.

Also, by closing accounts with little or no balance, you’d be shrinking your credit utilization ratio.

10. A college degree won’t make your score any higher

Your credit score has nothing to do with how far you’ve climbed up the ladder of academia. The only thing that matters is how you manage your credit — although a degree in finance may help you successfully juggle your accounts.

11. Checking your credit won’t damage your score

There’s a difference between soft and hard credit pulls. Checking your own credit is a soft credit inquiry, so there’s no damage done.

But what can slightly damage your credit score is making a series of hard credit inquiries at once — think credit cards, auto and home loans. Hard inquires stay on your credit report for 24 months and have the potential to shave a few points off your score for each inquiry.

12. Improving your score isn’t impossible

People who’ve filed for bankruptcy or have had their possessions repossessed may think that their credit score is irreparable, that’s not true. It may take some time for these black marks to disappear from your credit report, but once they do, you can learn from your mistakes and start working towards a healthy financial wellbeing.
Get a deeper understanding of your credit score

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