What Your Credit Score Isn't

The world financial system today revolves around credit. While virtually every consumer could tell you what credit is, most could not tell you just what items do and don't factor into a credit score. Credit scores are largely still a mystery to the public, a public that all too often finds itself at the mercy of those very numbers.

Nevertheless, credit scores have both an upside and a downside. The good news is that, regardless of what you may think or what your past experience has been, your credit score can be largely controlled by you. The bad news: credit scores don't change overnight, so if you get into trouble, it can take quite awhile to rehabilitate your score. Though they may change slowly, they can indeed be changed.

It's true that many years ago discriminatory lending was a common occurrence. Today, however, legislation is in place to safeguard against such practices. And, although it hasn't been eradicated completely, the overwhelming majority of reputable lenders can be depended upon to 'play within the rules.' Steep fines, lawsuits and severe public backlash await those that are caught engaging in any sort of unfair or inequitable financial activities. So, don't labor under the false assumption that your credit score includes information that will bias a lender against you. Indeed, one of the major reasons for the inception of the credit score was to ward against arbitrary personal judgments, because that three-digit number is a faceless entity.

A credit score doesn't consider personal information. Marital status, gender, nationality, race, creed and religion are not considered. People are not grouped according to income levels. Poorer borrowers are not distinguished from others in the pool of applicants. Furthermore, the score doesn't reflect the borrower's age. Younger applicants cannot be denied in favor of older, more established individuals, or vise versa. If an older person has a limited credit history, their score will reflect that; and if a younger person has lots of good entries, it will show in the score that he or she receives.

Your credit score also is not based on the amount of money you make. You might have an excellent credit score of 800 and make $15,000 a year. Of course, a lender may deny you credit on the basis of not having enough income to adequately repay the loan that you're seeking. In such a case the lender will undoubtedly look deeper into a borrower's other information to decide how much credit to offer (if any at all), but the credit score is not the source of this information.

Custody agreements, alimony payments and government assistance are not factors that are considered in the credit-score formula. These circumstances cannot be used to lower a person's score. However, the borrower may list such sources on a loan application as additional income to be considered for repayment if he or she so chooses. Additionally, information that's not included on a credit report at all can't be considered for purposes of the credit score. In other words, for example, the neighborhood that you live in is not a factor. The number of children that you have is not a factor. Extraneous information does not play a part in the makeup of your score. It's absolutely illegal to extend or deny credit based on any of these factors.