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The Impact of Race and Gender On Your Credit Score

Just in case you like to speed read articles, I’ll cut to the chase and tell you that race and gender DO NOT impact your credit score.

Many consumers believe a host of myths and misconceptions about their credit scores. Some of the biggest fallacies surrounding this topic involve race, income and other factors that do not impact your credit rating at all. Here are some other common myths.

Fact Vs. Fiction About Credit Scores

FICTION: If I check my credit report often, all those “inquiries” will lower my credit score.

FACT: Your personal inquiries are called “soft” inquiries and do not impact your credit score at all. You can check your credit as much as you’d like with no negative impact, as long as you do it through a credit bureau or a company authorized to issue credit reports, such as Fair Isaac, creator of the FICO score.

EXPLANATION: Even though you may see all kinds of inquiries in your credit file, many of them have no bearing on your FICO score. For instance, your FICO score doesn’t count your own credit inquiries, as well as those from existing creditors who are reviewing your account, or lenders trying to offer you “pre-approved” credit.

FICTION: I pay cash for everything and don’t buy on credit or use credit cards, so my credit score should be excellent.

FACT: Having no credit history or never using credit can have a negative impact on your credit score.

EXPLANATION: It helps your FICO score to have some history of paying credit obligations on time. FICO reports that people with no credit cards tend to be higher risk than those who have credit cards, use them periodically, and manage their debt responsibly.

FICTION: I’m going to close out my old accounts since I’m not using them any more, and that will improve my credit score.

FACT: Depending on your overall credit profile, you can actually hurt your credit score by closing older, more “seasoned” accounts.

EXPLANATION: Generally speaking, it works in your favor to have older accounts in your credit file because it shows that you have a longer credit history.

FICTION: The most important factor in my credit score is whether or not I am “maxed out” on my credit cards.

FACT: The single biggest determinant of your credit score is how well you’ve paid your bills on time in the past.

EXPLANATION: Your FICO score takes into account whether or not you’ve had late or missed payments, how far past due your bills were, how long ago the late pays occurred, as well as whether you have any collection items or public records, such as a repossession, foreclosure or judgment against you.

FICTION: My age, race, gender, marital status, income or where I live can impact my credit score.

FACT: None of those factors are taken into consideration at all when your FICO credit score is determined.

EXPLANATION: Under U.S. law, it is illegal to for credit scoring to take into account race, age, color, nationality, religion, sex and marital status.

Your credit is of such critical importance that you can’t afford to operate on the basis of false information. So be sure to separate fact from fiction.

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