Do You Know What Affects Your Credit Score?

iStock_000012716122SmallYou probably already realize the importance of maintaining a good credit score. But according to a recent study by TransUnion, it’s pretty likely that you don’t know exactly how your credit score is calculated or which monthly bills actually affect it.

According to the survey, many people were misinformed on how credit bureaus track their information:

  • 48 percent though rent payments are reported to credit bureaus
  • 53 percent thought cable and internet payments are reported
  • 54 percent thought utility payments are reported
  • 52 percent thought credit bureaus track cell phone bill payments

The bottom line is that more of your bills carry the potential to harm your credit than they do to help it.
For example, paying your rent on time each month doesn’t boost your credit rating whatsoever, but if your landlord reports you for non-payment it can significantly harm your score. The same goes for your utility bills and cell phone payments. You don’t earn good credit by paying bills on time, but if you miss a payment then you might be in trouble. Even after paying a bill that reached the collections stage, it may still affect your credit for a while afterward.

So what is reported to credit bureaus?

  • Credit card payments
  • Mortgage payments
  • Auto loan payments
  • Personal loan payments
  • Student loan payments
  • Certain other types of debt

So here’s what you need to remember about building your credit score: In order to earn good credit, you need to use a credit card, take out a personal loan at the bank, or take on one of the other above forms of debt. Make regular payments and you will build a credit score. At the same time, avoid harm to your score by paying everything on time. Don’t forget your electric bill, pay rent late, or forget to pay off your cell phone plan when you switch to another carrier.

Credit is extremely important it today’s world, since a good score will help you secure a low interest rate on home and car loans, and may even affect things like your insurance rates. If you need more help with your credit score, it can help to work with a credit counselor.