Can Your Age and Income Hurt Your FICO Score?

Blog posted On June 24, 2020

When you’re getting ready to buy a home, you’re probably taking a closer look at your credit score.  If you’re working on improving your credit score it’s important to know what helps or hurts your score, but also what factors do not impact your score at all.   Your FICO credit score is the most widely accepted credit score by banks and lenders and is influenced by five factors: your payment history, your credit utilization, the length of your credit history, your credit mix, and new credit. 

Contrary to popular belief, these twelve factors do not impact your credit score:

1. Your race, religion, gender, or age
2. Your marital status
3. Any disability you have
4. Your job and your salary or hourly wages
5. Any requests your employers have made to see your credit history
6. Whether or not you receive public assistance
7. Where you live
8. Child support obligations
9. Current interest rates on your credit cards or any loans you have
10. New information that has not yet appeared on your credit report
11. Old information that is no longer on your credit report
12. Any information that does not show how you use your credit

Understanding your credit score is the first step to improving it.  Your credit score does not have to be perfect to qualify for a mortgage, but a better score could help you qualify for a lower interest rate. 

The highest weighted factor of your credit score is your payment history (35%).  You can improve your payment history by paying your bills on time and avoiding missing payments.  Next, is your credit utilization ratio (30%).  Financial experts recommend trying to use less than 30% of your credit limit.  For example, if you have a $1,000 limit on a credit card, try not to carry a balance over $300.  If you can lower your credit utilization to 10%, that will help your score even more.  The length of your credit history accounts for 15% of your credit score.  This is not something you can change, but something to keep in mind.  The longer your history of responsible credit management the better.  Credit mix and new credit are each worth 10% of your credit score.  A diverse credit mix may include a car loan, student loan, and a credit card.  You don’t need to go out and open new credit cards, but if you haven’t used an older card for awhile, consider using it for something like a recurring subscription and paying it off every month instead of closing it out.  New credit includes any new accounts you’ve opened or hard inquiries on your credit report.  When you’re in the process of applying for a mortgage you do not want to open any new accounts because that will hurt your score.

If you have any questions about your credit score and how it impacts your ability to qualify for a mortgage, let us know.  There are different types of home loans available to cater to varying levels of credit scores.  We’ll find the perfect fit for you.

Sources: CNBC, Experian