Financial Fitness Tips: What affects your credit score?

Solid Ground’s Financial Fitness Boot Camp and ConnectUp team up to create financial fitness tips like these to send out through our Resource Wire

Financial Fitness Boot Camp Coach, Judy Poston

Financial Fitness Boot Camp Coach, Judy Poston

Your credit score is important! Keeping it high will allow you to take out loans in the future. Financial Fitness Boot Camp explains why the following actions are SAFE or HARMFUL to your credit score.

Checking my credit report: SAFE!

Checking your own credit report will not hurt your credit rating because that is considered a “soft” inquiry. Plus, you are entitled to check your own credit report under federal law. (A “hard” inquiry in your credit file is a record of any application for credit that you made.)

Getting married to someone with bad credit: SAFE!

Your credit score or credit rating will not suffer simply because you get married to someone with bad credit. By maintaining separate credit accounts for things like credit cards and car loans, a spouse with good credit can keep his or her credit rating from being impacted by the other spouse with a poor credit history. But, if you take on joint financial obligations, such as a mortgage, and the bill doesn’t get paid for any reason (including divorce), then that will impact both parties’ credit scores.

Renting a car with a debit card: HARMFUL! 

Believe it or not, renting a car with a debit card can hurt your credit. Why? Doing so can trigger a “hard” inquiry. In the fine print of many auto rental agreements is a provision giving the car company the right to pull your credit report if you pay with a debit card. Who knew?!

Paying in full a high credit card balance: SAFE!

Paying off a high credit card balance will not hurt your credit score. On the contrary, it should boost your credit score. According to FICO, 30% of your FICO credit score is based on the amount of credit card debt you have outstanding. Lowering your credit card debt generally increases your credit score.

Opening a new store credit card to get a discount: HARMFUL!

Opening a new retail store credit card can lower your credit score, mainly because the application will generate a “hard” inquiry on your credit report. So the next time you’re out shopping and a nice lady behind the counter tries to sign you up for a store credit card so you get a discount on your purchase, just politely say, “No thanks.”

Disputing a credit card bill with the credit bureaus: SAFE!

Simply disputing a credit card bill should not have any impact on your credit score. However, you should be aware that when a dispute is under review, that credit account is effectively “removed” from consideration in the credit-scoring process.


We invite you all to call the Financial Fitness Boot Camp at either 206.694.6739 or 206.694.6776 and make an appointment to see one of Solid Ground’s financial counselors. They can pull your credit report for free, teach you how to develop a budget/spending plan, show you how to read your credit report, and explain what to do if you need to dispute an item on your report. They would be happy to assist you with whatever you want to focus on to help you reach your financial fitness goals! Don’t delay, call today!

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Late mortgage payments & your credit

Foreclosure signHow does being late on your mortgage affect your credit? The short answer: It depends.

When you hear about credit scores, what people are most often referring to is a FICO® score. Your FICO score is a way to summarize your credit risk at any given moment in time. The score takes into account your payment history, outstanding debt and length of credit history, among other things. Any potential lender will look at this score to determine how much of a risk you are and what interest rate you will be charged as a result of your risk level.

So, what happens to your credit score when you fall behind on your mortgage payment? That depends where you started. People with higher credit scores actually take more of a hit when they fall behind on their mortgage and when they go through foreclosure. For example, according to FICO:

Homeowner A

  • Starting credit score: 680
  • 90 days late: 610 (70 point drop)
  • Foreclosure sale: 585 (95 point drop)

Homeowner B

  • Starting credit score: 780
  • 90 days late: 660 (120 point drop)
  • Foreclosure sale: 630 (150 point drop)

While Homeowner B still comes out with a higher score after foreclosure, their drop in overall points is significantly greater than that of Homeowner A. This is likely because Homeowner A has some non-mortgage delinquencies or credit issues that have already lowered their score, so the effect of the mortgage delinquency isn’t as great. It also takes longer for a homeowner with a high credit score to recover their previous credit status after a delinquency or foreclosure.

When dealing with a mortgage delinquency, the options that allow you to keep your home typically have the least impact on your credit. Most loan modifications, including those offered through the federal government like Making Home Affordable, will not affect your credit score. Any negative credit impact comes from late payments that happened prior to the modification. A forbearance agreement or repayment plan can additionally tag on a negative impact to your credit score if your lender reports you as paying under a partial payment agreement.

Non-retention options such as short sale and foreclosure sale will have the biggest hit on your credit because of the level of delinquency and failure to pay on the loan as agreed. A common assumption is that a short sale is better for your credit than foreclosure. This may not actually be true.

Both will impact homeowners’ credit scores in a similar way because they typically involve significant delinquencies. Beyond that, it is difficult to say for certain how a short sale will impact your credit because there is no specific reporting code for short sales. This means that some of how your credit is affected is up to your lender’s discretion.

If you are behind on your mortgage and want to know more about your options, please call 206.694.6766 or email housingcounseling@solid-ground.org. There is no charge for Solid Ground services.

For more general information on this and related topics, attend our next free Mortgage Information & Enrollment Workshop on Wednesday, May 28th from 6-8pm at Solid Ground (1501 N 45th St, Seattle, WA 98103).

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