The easy answer to this question is no, your job does not directly influence your credit score. The complete answer to that question may be more complex, however.
For example, in Canada, a person looking for an automobile loan may find that (s)he is evaluated on a variety of factors, including the duration of their current job and the salary they collect.
Salary is definitely also a factor in the U.S. when a credit agency is evaluating whether or not to grant a loan to an individual. All businesses who provide loans examine the debt percentage – how much a person owes compared with how much that person brings to the table in terms of income.
But credit reporting agencies who develop the FICO and other credit scores do not consider salary in their numerical calculations.
In fact, an objection that many have to the credit score is that it is so impersonal, and does not take into account any personal factors, such as an illness in yourself or close family member or the economic conditions in the area where you live.
On the other hand, they are also not allowed (and don’t) to take into consideration any information regarding race, gender, religion, nationality, marital status, age, hometown, interest rates charged, salary, occupation, job title, length of employment or employment history.
Many people consider this good news, since there are often gaps in employment history or decreases in salary over the course of a career, but those who manage to keep their finances in good order through those kinds of challenges are able to maintain credit scores just as high as those who never had such problems.
A credit score may, however, but used when you are looking for a job. Potential employers have begun to use credit scores to determine the relative responsibility of potential hires. It is possible that your potential employer will know about any debt you have, bankruptcy, or poor credit history.
A person who has been responsible in his or her finances is considered a better risk as an employee; since they make the assumption that such a person will also be responsible with the company assets.
While some consider it a difficult thing that landlords, employers and insurance companies may all run credit reports on you before determining your rates or deciding to rent to you, it is true that every business is attempting to lower its risk factors in any way possible, and hiring, renting to, and insuring good credit risks helps lower business risk.
A credit score determines a great deal about whether or not you qualify for a large loan, such as a mortgage or vehicle loan. It tells the lender whether or not you are a good credit risk, if you will likely pay the loaned money back, and if you will care for the property you want to purchase.
While everyone knows that there is a number called a credit score, many are unaware of what a credit score is, how it is calculated and what each type of credit score means.
There are three types of credit score to address today. The first is the most commonly used score, the FICO score.
The FICO score is named after the company that developed the algorithm for the score, the Fair Isaac & Company. Since this company began evaluating credit risk in the 1950s, many lenders have used it widely as a solid way to evaluate the credit risk of a borrower.
Although the neither Fair Isaac or the credit bureaus who rely heavily on the score will reveal exactly how it is calculated, it is well known that certain factors strongly affect the strength of the FICO score, including the following:
· Late payments
· The length of time a person has had a line of credit
· The ratio of credit used vs. amount of credit available (the lower the ratio, the better – don’t max out on credit cards)
· The length of time a person lives in a residence
· Negative credit reports – bankruptcies, charge offs or any other arrangement where the creditor did not receive full payment from the debtor.
The three credit bureaus (TransUnion, Equifax and Experian) each calculate this score separately and come up with unique numbers, although they are generally similar. They do, however, have different names.
For example, the credit score developed by Equifax in conjunction with Fair Isaac is known as the Beacon Score. This score ranges from 300 to 850, and the higher score is more desirable.
Similarly, the Empirica score is the score used by TransUnion. This number ranges from 150 to 934, again, with the higher numbers being preferred.
Experian uses the Fair Isaac score as their standard. This score ranges from 330 to 830.
With any of these credit scores, the company subscribes to the initial algorithms from Fair Isaac & Company, then adds their own version of the FICO score, which yields the different scales.
The best single thing a borrower can do to improve these scores is to pay bills on time.
We often hear about someone closed that had problem with their banks because they have a bad credit history. They didn’t want to lend him anymore money or were asking for extra security because his beacon score was not high enough. Your Beacon score is something very fragile and little mistakes can make it drop drastically for nothing. Here are some common mistakes to avoid in order to keep a good beacon score.
Moving
I have seen this “excuse” several times in my life. “I moved and I forgot to make my address change on a credit card”. Unfortunately, this is not good enough to make the credit reporting agency to correct your credit bureau and repair your credit score. You are responsible of all your debts and moving is not an excuse for not paying your bill. You may have forgotten about a “pay in 6 months” bill you contracted before moving. Here are a few quick solutions to avoid this issue in the future:
- Write a list of all your bills and contact them advising of your new address before moving.
- Contact your post office and ask them to forward your mail for 6 months (this will cost you maybe $30 but will keep your beacon score untouched).
- Once moved, call the buyer of your house a month or two after to see if he received anything for you. You might have forgotten something very important!
Dispute
Another common mistake that affect your beacon score is the fact of not paying a bill that should not be paid by you. This often happens with cell phone companies (they have that tendency of charging a whole bunch of fees on your bill). If you don’t pay and the dispute last a few months, you will end-up with a mark on your credit bureau and you can even get into a collection agency. In order to avoid this situation:
- Verify your bill as soon as you receive it. If you come back to the company 30 days after the issue, your chances are pretty low. On top of that, you may deal with their perception department instead of their customer service center 
- You must pay your bill and ask for a credit after. The company is more likely to listen to you if you pay your bill first and will probably give you a credit on your next bill. In the end, the important thing is keep your beacon score stellar.
There 3 other common mistakes that affect your beacon score but we will see them in a later post.
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Every Saturday, The Credit Toolbox does a review of good read around the blogosphere. Here’s what caught my attention this week:
PF Credit Cards shows you How to Beat Priceline and Get a Winning Bid.
Jim at Bargaineering has a Review of MyFICO ScoreWatch.
Tyler from CreditCards.com talks about how Credit Card Regulation is Brewing for College Campuses Again
Credit Addict tells us about the Pentagon Federal Visa Rewards Card.
Mr. Banker at Best Interest Rate Banks gives us his review of High Interest Savings Accounts.
Studenomics Breaks Down Student Loans in a non-confrontation manner.
Credit card shopping? “Chase Platinum Credit Card”, is a review of Chase’s 0% interest card offered by Credit Card Offers IQ.
Carnivals:
Carnival of Personal Finance
Carnival of Debt Reduction
Carnival of Financial Planning
If you liked this article, you might want to sign up for my FULL RSS FEED. Then, you would get my daily post in your email and can read it at any time. To subscribe, please click HERE..
