Does Income Affect Your Credit Score? [2021]

A lot of people wonder whether or not their income affects their credit score. The answer is a little bit more complicated than a straight “yes” or “no” since there may be indirect effects on your score and people are often asking this question as it relates to pursuing some form of credit.

Below, I’ll dive into the details.

Does income affect your credit score?

Your credit score is not directly affected by your income but income definitely comes into play when pursuing and obtaining credit.

Credit scores explained

As I further explain in my beginner’s guide to credit scores, your FICO credit score is determined in the following ways:

  • Payment History (35%)
  • Utilization (30%)
  • Credit History (15%)
  • New Credit (10%)
  • Mixed Credit (10%)

As you can see, there’s no category where income fits in.

“Income isn’t even on your credit reports so it cannot be considered in credit scores because credit scores only consider what’s on your credit reports,” John Ulzheimer, formerly of FICO and Equifax stated to CNBC.

“In fact, no wealth metrics are factored into your credit scores.”

Why is that?

Well, lenders are more concerned about your ability to borrow funds and pay them back than how much money you make.

Just because you make a certain amount of money, that doesn’t mean that you’ve established a track record of paying your bills on time.

In fact, you might make a lot of money but have little to no experience in managing credit lines and in that case, you could pose a much higher credit risk than someone making a third of your salary but with a long payment history. 

A study by the Federal Reserve found that the correlation between income and credit scores is not as strong as many believe.

“Our analysis indicates only a moderate correlation between income and credit scores,” the study found.

Yet, with that said, income still often indirectly affects your credit score. This is largely because people with higher incomes are typically better suited to have lower utilizations, since they can access higher credit limits or more rapidly pay off debt.

People with higher incomes may be less likely to miss a payment because they can’t afford to make the payment.

However, those with higher incomes might be more likely to forget to make a payment, as WalletHub found, “People with high income are almost twice as likely to miss a payment due to forgetfulness as people with low income.”

This could be true because high income individuals may not feel the financial pressure that low income individuals feel.

Since utilization is 30% of your FICO credit score and payment history is 35%, it’s sometimes the case that people with higher incomes have better credit scores.

Although income does not directly affect your credit score, it is still a very important factor when a lender is making the decision to extend credit to you, especially when it comes to installment loans. 

Tip: Use WalletFlo for all your credit card needs. It’s free and will help you optimize your rewards and savings!

Specific credit scoring models

Many banks and lenders have their own type of scoring model which they use to determine your credit worthiness.

These typically utilize your credit score along with other factors, such as your income, housing status, etc.

So for example, a bank issuing a credit card will consider your FICO credit score but will also incorporate your stated income into its algorithms to determine if they can offer you credit and if so, how much credit you can be offered.

Some premium credit cards may have income cut-offs where below that your odds of being approved for that credit card are close to zero, but often a lower income just means a lower credit limit issued by that bank.

So income is often a secondary consideration for many credit card issuers and your credit score is what is much more important. 

However, for many models used to determine eligibility for installment loans, income plays a much more significant role, and one way it does that is by measuring your debt-to-income ratio.

Related: Can You Get a Credit Card with No Job?

Debt-to-income ratio

Your debt-to-income ratio looks at how much income you have coming in each month versus how much debt you’re required to pay off each month.

To find it, you divide your monthly income by your total amount of monthly debt payments (car note, student loans, minimum credit card payments, etc.).

 This should be distinguished from your credit card utilization (credit-to-debt ratio), as they are two completely different concepts.

Although it has nothing to do with your credit utilization, there’s a similarity between the two in that they both should be kept in check in order to maximize your chances of being approved for better credit lines and/or loans.

I recommend to keep your debt-to-income ratio between 15% and 36%. The lower the better, although it’s beneficial to have some level of installment debt so that prospective lenders can see that you can handle making payments and it also helps bump up your credit score. 

Keep in mind that, subject to certain exceptions, 43% is the maximum debt-to-income ratio you can have while still meeting the requirements for a “qualified mortgage.”

You can still have success with lenders even with an income-to-debt ratio over 50% but things get much tougher for you in that scenario, so try to remain much lower than that. 

What specific level of income-to-debt ratio is right for you depends on what type of credit you plan on pursuing and your own comfort level with making payments for your debt.

Some prefer to keep it closer to 15% to maximize savings while others may prefer levels closer to 30% so they can enjoy certain comforts, like living in a nicer loft, area, etc.

You should also make sure to factor in unexpected changes to your income that could occur in the future, since that could affect your ratio significantly. (I’ll write more on this topic later since there’s plenty to cover about it.)

Tip: Check out the free app WalletFlo so that you can optimize your credit card spend by seeing the best card to use! You can also track credits, annual fees, and get notifications when you’re eligible for the best cards!

Verifying income

So when your income does matter in certain scenarios, how do banks verify your income?

The answer differs. Believe it or not, for credit card applications, it’s often the case that a bank never requires you to verify your income. (If you have a very high stated income of a few hundred thousand dollars, that might be a different story.)

Every now and again, a bank may require you to submit pay stubs or bank statements for a financial review or for a credit card application, but these instances are very rare and are definitely the exception.

Related: What Does “Accessible Income” Mean on a Credit Card Application?

However, for installment loans, such as mortgages, you can guarantee that you’ll have to prove your income by submitting pay stubs or tax forms.

And that makes more sense.

For one, installment loans typically involve much higher sums of money so the stakes are higher.

But practically speaking, an installment loan issues you a monthly bill every month that does not depend on the previous month’s spending like a credit card.

Thus, it’s even more important for a lender to see that you’ll have a steady flow of funds coming in each month since you’re also guaranteed to see a steady flow of those bills coming in.


Does income show up on your credit report?

No, your income does not show up on your credit report.

What is a good debt-to-income ratio?

I recommend to keep your debt-to-income ratio between 15% and 36%. 

Can you have a good credit score with a low income?

Yes, it is possible to have a very good credit score while having a low income as long as you don’t miss payments and keep your utilization low.

Is there a correlation between income and credit scores?

A study by the Federal Reserve found only a moderate correlation between income and credit scores.

Final word 

Your income does not affect your credit score, at least not directly. Having a higher income often allows you to decrease your credit utilization and that can indirectly benefit your score but there’s no category for income when determining your FICO score.

On the other hand, your income often comes into play when lenders make their decision to extend your credit and for installment loans, such as mortgages, you should always expect your income to be relevant since your debt-to-income ratio is such a significant factor.

How Credit Mix Affects Your Credit Score [2021]

Credit mix is a category that accounts for 10% of your total FICO score. It’s an often overlooked category and probably the least discussed category of your score.

While it’s likely the least important factor in determining your score, it’s still beneficial to understand how this category is determined so that you can eventually reap the benefits of having a good credit mix on your credit report. 

What is credit mix?

Credit mix looks at how diverse your different credit lines are. There are two major types of credit lines: installment and revolving credit lines. (Also discussed are open lines of credit.)

Tip: Use WalletFlo for all your credit card needs. It’s free and will help you optimize your rewards and savings!

Installment credit lines

For installment credit lines you usually pay a fixed amount each month until you pay down an entire balance due. These loans are typically financed for years (and sometimes decades) at a time.

You can often pay these off in advance or expedite the pay-off process by making things like double payments.

Common examples of installment loans are:

  • Home loans
  • Auto loans
  • Student loans
  • Personal loans (can often be revolving)

Because the payments for these loans remain the same each month, your income and income-to-debt ratio can play a large role in obtaining these.

Revolving credit lines

Revolving credit lines offer you a credit limit that you can utilize at whatever pace you want to. So, for example, you might have access to a $10,000 credit line but you can choose to only use $500 of that if you’d like.

Because of that, your monthly payments can vary which is a key distinction between revolving credit lines and installment lines.

Your income is not quite as important in determining your approvals for revolving lines (it’s more about your credit score).

Common examples include:  

  • Credit cards
  • Store credit cards (Macys’ card, GAP card, etc.)
  • Trade lines (credit line at a jewelry store)
  • Personal loans

Open lines of credit

Open lines of credit are credit lines where you’re given an unspecified amount of credit usually on a monthly basis and expected to pay that balance in full each month.

Many open lines of credit will not reflect on your personal credit report (unless you miss a payment). Other open lines like charge cards do report on your credit report but don’t affect your credit card utilization.

Examples of these include:

  • Utilities
  • Charge cards

How much does credit mix affect your credit score?

Your credit score is determined by the following categories:

  • Payment History (35%)
  • Utilization (30%)
  • Credit History (15%)
  • New Credit (10%)
  • Mixed Credit (10%)

It would appear that mixed credit carries the same weight as new credit but according to, Barry Paperno, a consumer operations manager at stated that, “[f]or the most part, it can be considered the least important of the five main components.”

That seems a bit contradictory since new credit is allocated the same 10% as mixed credit but that information is coming straight from an operations manager at myFICO, so it’s safe to say it’s probably accurate. 

Why is mixed credit important?

Creditors want to see that you can successfully manage different types of credit. 

Barry Paperno also stated that “FICO’s research has found that, all things being equal, consumers with a ‘mix’ of credit types on their credit reports tend to be less risky than those who have experience with only one type of credit.”

Presumably, the better you are at managing an array of different credit lines, the more responsible of a borrower you might be.

Statistically speaking, this probably is accurate as you can imagine that a typical profile of someone with a mortgage, car loan, student loan, and a couple of credit cards would on average be more stable than someone with only five department store credit cards.

Of course a lot of other correlative factors probably come into play here like income and education, but I don’t doubt what the statistics probably show about consumers with mixed credit profiles. 

Why is credit mix important to the consumer?

Practically speaking, mixed credit is important because FICO says having a variety of loans is necessary for earning a perfect credit score, according to

Ethan Dornhelm, principal scientist at FICO reiterated that the change in credit score is around “10 to 20 points, not 100,” according to FoxBusiness.

So this category is probably more for the over-achievers seeking perfect or near perfect credit scores.

In other words, if you’re just starting to build up your credit or rebuilding your credit, I wouldn’t prioritize diversifying your credit mix.

Instead, focus on lowering your utilization and building up your payment history since those things make up 65% of your credit score. 

If the credit diversification happens on its own then great, but I wouldn’t go out of my way just to pull out different types of loans for a bump in my score.

It’s probably best for most people to just let it happen naturally. Plus, it’s possible that the effect from your credit mix is interrelated to a number of other factors on your credit report like your payment history, utilization, other accounts, etc., so it would likely be difficult to accurately predict what kind of boost you’d receive from taking out a given loan in any event.  

Tip: Check out the free app WalletFlo so that you can optimize your credit card spend by seeing the best card to use! You can also track credits, annual fees, and get notifications when you’re eligible for the best cards!

How to perfect your credit mix

One interesting quote about the effect of mixed credit comes from Paperno at FICO and states that, “The number of each type of account is not as important for a person’s score as simply having experience with both types of accounts, either currently or within the recent past.”

There are two take-a-ways from this quote for me.

First, it’s important to note that the number of different accounts doesn’t matter much. This makes a lot of sense since a lot of people probably don’t have more than one type of home loan, auto loan, etc.

Second, the quote stresses that what is most important is having experience with “both” types of accounts.

That’s important to me since it seems to imply that what’s most important is just having a mixture of both installment loans and revolving credit, since those are the two major different types of credit lines.

Open lines of credit may not matter as much.

Tip: Use WalletFlo for all your credit card needs. It’s free and will help you optimize your rewards and savings!

Different weight for different types of accounts?

There’s conflicting information on how much having different types of installment and revolving accounts affects your score.

Obviously, the quote from Paperno states that the number of each account type isn’t as important as having both types (installment and revolving accounts).

But the quote also doesn’t state that having a good mix of different types of installment and revolving credit lines is not important or not considered.

Since FICO doesn’t release exactly how they calculate their credit scores, it’s hard to know exactly how important it is to have a variety of each type of credit line. My guess would be that it’s not very important to your overall score.

That’s because the mixed credit category is the least important factor and what’s most important for this factor is merely having both types of credit: installment and revolving.

Thus, if you have a little bit of both revolving credit and installment credit, you probably are reaping the majority of whatever little benefit “mixed credit” is having on your overall score. 

Still, some have stated specific guidelines about maintaining a proper mixture of credit.

For example, claims that “When it comes to maintaining a good mix of credit, most advisers recommend that you have one loan for every 3 to 5 credit cards.”

I don’t exactly know who these advisors are that recommend that but I do think it makes sense that the overall make-up of your mixture of credit is considered to an extent.

For example, I could see why a home loan would make you appear more responsible on paper than having an auto loan, since those who obtain home loans probably have a better track record on average than those with just auto loans.

And don’t forget, there’s many different models of your FICO score, some of which are specifically tailored to different industries.

It’s very possible that a FICO model designed for the auto industry would give more weight to credit mix that has a history of auto loans and the same with mortgages. Again, that’s speculation on my part but I think that it makes sense. 

Mixed credit FAQ

How much does mixed credit affect your credit score?

Mixed credit is 10% of your FICO score and experts state that it will typically only impact your credit score by a matter of around 10 to 20 points.

What is a good credit mix to have?

Some advisers claim that you should have one installment loan for every 3 to 5 credit cards. However, others believe that it is important just to have at least one type of installment and at least one type of revolving credit line.

Why is mixed credit important?

Research shows that consumers with a mix of credit types tend to be less risky than those who only have experience with one type of credit.

What are open lines of credit?

Open lines of credit are credit lines where you’re given an unspecified amount of credit usually on a monthly basis and expected to pay that balance in full each month.

What is a revolving line of credit?

Revolving credit lines offer you a credit limit that you can utilize whenever you want.

What is an installment credit line?

An installment credit line is a line of credit that you usually pay a fixed amount each month for until you pay off the entire balance over time.

How is your FICO score determined?

Your credit score is determined by the following categories:

Payment History (35%)
Utilization (30%)
Credit History (15%)
New Credit (10%)
Mixed Credit (10%)

Final word

Overall, establishing your credit mix should not be a major priority since it is the least important factor in your credit score and it’s easy enough to naturally diversify your credit with both installment and revolving credit lines. However, since it could end up bumping up your score 20 to 40 points, it’s worth it to keep an eye on it and monitor how your credit mix is developing as you continue to pursue different types of credit. 

Should You Pay off Your Credit Card Balance Each Month? [2021]

For a lot of beginners, there’s some confusion regarding whether or not you should pay off your credit card balance each month.

A lot of people actually think it harms your score to pay off your balance in full each month and others swear you should pay off your balance each month to avoid interest.

So which is it?

In a way, both sides are correct, it’s just that there needs to be some clarification about when you’re paying off your balance. I’ll explain why you should pay off your balance each month and how you can benefit your credit score in the process. 

Before I jump into whether or not you should pay your bill, it helps to understand how this question fits into the broader scheme of improving your credit score. So here’s a quick refresher. 

Tip: Use WalletFlo for all your credit card needs. It’s free and will help you optimize your rewards and savings!

Your credit score 

When we’re talking about the pros and cons of paying off your credit card balance, we’re talking about the “utilization factor” of your credit score.

Your FICO credit score is determined in the following way: 

  • Payment History (35%)
  • Utilization (30%)
  • Credit History (15%)
  • New Credit (10%)
  • Mixed Credit (10%)

Your utilization is also called your “debt to credit ratio.”

So for example, if you have a $10,000 total credit line and you are using $3,000 of that credit line then you have a 30% utilization.

Utilization makes up 30% of your total credit score, making it the second most important factor for your FICO score. So it’s vital that you understand how paying off your bills will affect it. 

The ideal utilization 

Ideally, you want to keep your utilization under 30%, although I actually recommend striving for ~5%.

Generally, the lower your utilization the better, until you get to 0%. And this is where the confusion usually comes in. 

You want to keep your utilization somewhere above 0% to maximize the benefit to your credit score. Why does it hurt your score to keep it at 0%? After all, doesn’t that mean you’re taking care of all your debt as opposed to just some of it? 

The answer is that your credit score is meant to reflect how big or how little of a credit risk you are (i.e., how likely you are to pay back what you are borrowing). If your utilization is at 0% then from the perspective of a lender, you look like someone who does not use your credit. 

This means that you may not be experienced with borrowing and repaying credit and may only be experienced with not borrowing available credit. While the latter still makes you responsible, the former makes you appear even more responsible and experienced (and not to mention profitable). 

That’s why having more than 0% utilization but less than 10% (or 30%)  is ideal. It shows that you can borrow money and still keep yourself in check and pay it back (i.e., be responsible). 

Related: How to Improve Your Credit Score Fast

Tip: If you have maxed out credit cards, get added as an authorized user to someone that has a high credit limit and you can instantly improve your credit utilization.

How does it affect your credit score? 

In the end, only employees and officers privy to FICO’s algorithms know exactly how a 0% utilization affects your credit score.

According to MyFICO, Barry Paperno, consumer operations manager for FICO, stated that a tiny reported balance can trump a zero balance.

 “In short, the lower a consumer’s credit utilization, the better, but having a small balance is slightly better than having no balance at all.”

Thus, it’s clear that having a small balance will benefit your score but if I had to guess, it’s not by a whole lot. But if you are shooting for a perfect credit score, it could probably help you get there.

One thing to remember is that lenders often have their own systems that work in conjunction with FICO scores.

It’s very possible that their systems factor in credit card usage on others cards because that would indicate to them that you are a more profitable customer (remember, these banks make a lot of money on interchange fees).

When applying for a credit card, I’ve even had bank reps on the phone bring up the fact that I have a card that wasn’t getting put to use.

Thus, even if the benefit to your FICO score is minimal, I’d still try to show usage on my credit cards so that other lenders will view you more favorably.

So should I pay my credit card off each month? 

Now that you see why having a balance each month is beneficial, you may think you shouldn’t pay off your balance each month. But that’s not how it works. 

After your statement closes each month, your balance is then reported to the credit bureaus. Once it’s reported, that’s the figure that determines your utilization. 

Of course, after your statement closes and that balance is reported, you then receive your bill.

So you can pay off your bill 100% to avoid all interest payments and still have that utilization reported to the credit bureaus and benefit your score.

This is the ideal way it should work: make your charges, wait for your bill to come in, and then pay it all off. 

Related: How Does Payment History Affect Your Credit Score?

What if I pay off my balance after each charge?

Some people like to pay off their credit card balance after each charge or alternatively they might run up a a maximum balance and then pay off that balance multiple times a month (usually called “cycling” your credit card line).

Both of these are usually not beneficial, except under certain exceptions. 

For one, if you pay off your balance after each charge or before your statement closes then you will be given a 0% utilization when your statement closes.

Thus, you will not be maximizing your FICO score. Also, I believe some banks may even limit you on the amount of payments you can make each month. 

Second, some banks become weary of you cycling your credit limit. This is especially true if your stated income is not very high and you’re cycling a high credit line multiple times a month.

Perhaps you have an authorized user who is also racking up charges so your total amount of spend comes close (or may even exceed) your stated income.

In this scenario, this can raise red flags and your account can come under investigation and in some cases even be shut down. 

Tip: Use WalletFlo for all your credit card needs. It’s free and will help you optimize your rewards and savings!

When it makes sense pay off your balance before closing 

Those two instances aside, sometimes it would make sense to pay off your balance (or at least most of it) before the statement closes. 

This would be a situation where you have a low overall credit limit. Let’s say you are still in the process of building your credit and only have access to $1,500 worth of credit.

You may easily exceed that on spend each month such that if you didn’t pay down your credit card, your utilization would be reported to the credit bureaus as nearly maxed out, which is not good! 

In that case, I would recommend trying to pay down the balance once or twice a month but try to keep something on your balance when it’s time for your statement closes. Even keeping $150 would give you an ideal 10% utilization. 

In many instances, once banks see you doing this a few times they will often increase your credit limit for you (Chase is really good about this).

This is different from the other situations where you’re cycling a high credit limit because the banks can see that you’re operating with a low credit limit and know that you don’t really have much breathing room. 

Finally, if you’re operating with an extremely low line of credit, such as a $300 line of credit, I wouldn’t stress about trying to keep a small balance before the statement closes.

If it’s not an issue for you to keep around $30 on your balance each month before closing then sure, do that. But if that’s causing you stress, I would probably just pay the whole thing off before my statement closes, so that my utilization is 0%.

I’d do that for several months to build up my credit report and then once I was ready to apply for another card, then I would go out of my way to keep around 10% on the card with that month’s closing statement. 


How much does utilization affect your credit score?

Utilization makes up 30% of your FICO credit score, making it the second most important factor. It can drastically impact your credit score if it is too high by bringing it down over 200 points.

What is credit card utilization?

Credit card utilization is what percentage of a given credit line you are using.

What percent of credit card utilization should I have?

According to Barry Paperno, consumer operations manager for FICO, you want your credit card utilization to be low but not zero for an optimal score. 5% utilization would be a good target to shoot for.

Should I pay my credit card off each month?

You should pay your credit card bill off in full in order to avoid any applicable interest. However, you want your balance statement to close with a small balance so that your utilization is not 0%.

Can I pay my credit card bill multiple times a month?

You can pay your credit card bill multiple times a month but some banks limit the number of payments you can process.

Final word

So in conclusion: 

  • You want to keep your utilization somewhere between 1% to 5% when your statement closes to maximize the benefit to your credit score.
  • By paying your balance in full after your statement closes you will avoid interest and allow the lender to report your utilization to the credit bureaus. 
  • Unless you have a low credit limit or some other circumstance, there’s no reason to pay off your bill before your credit card closes

How Does Payment History Affect Your Credit Score? [2021]

Payment history is the most heavily weighted factor in the FICO credit score formula. It’s very important to understand the effect that a late payment will have on your credit score and to do everything you can to avoid making late payments.

With that said, mistakes do happen, and so it’s helpful to understand exactly how late payments are factored into your credit score and what can be done to help if you’re ever hit with late payments.

How your credit score is calculated

FICO determines your credit score in the following ways:

  • Payment History (35%)
  • Utilization (30%)
  • Credit History (15%)
  • New Credit (10%)
  • Mixed Credit (10%)

Payment history is the number one factor for your credit score. This makes sense considering that the point of a credit score is to provide potential lenders with a way to gauge whether or not you might be a credit risk.

Viewing payment history would usually be the most telling way to measure how likely you are to manage future credit.

Tip: Use WalletFlo for all your credit card needs. It’s free and will help you optimize your rewards and savings!

What is payment history?

According to FICO, payment history is your track record for previous payments made on all loans and credit lines and includes the following: 

  • Credit cards (Visa, MasterCard, American Express, Discover, etc.)
  • Retail accounts (credit from stores where you shop, like department store credit cards)
  • Installment loans (loans where you make regular payments, like car loans)
  • Finance company accounts
  • Mortgage loans

Public record and collection items

  • Bankruptcies
  • Foreclosures
  • Lawsuits
  • Wage attachments
  • Liens
  • Judgments

Although many utilities, cable, internet, and phone companies often perform hard pulls on your credit, your monthly payments don’t usually show up on your payment history (I believe it has something to do with different state and regulatory laws).

However, if you go delinquent and a service provider has to charge off your account that can definitely be reported on your payment history, so always follow up with late payments! 

As an aside, FICO scoring model 9 will implement changes that will really help a lot of people with their payment history.

First, these “nontraditional” payment histories with utilities, rent, etc. are going to be considered for your payment history.

Second, medical bills in collections (whether paid or unpaid) will no longer hurt your credit score.

You can currently get some utility bills reported to your credit report by signing up for Experian Boost. If your payment history is lacking or a little suspect but you have made a lot of qualifying payments, Experian Boost can be well worth it.

How long do late payments stay on your credit score?

Late payments will remain on your credit report for 7 years, although some bankruptcies will remain on your report for up to ten years.

Keep in mind that the negative effect of the late payment will be lessened over time, as discussed below.

How much do late payments affect your credit score?

How much a late payment affects your credit score depends on a mix of factors, including:

  • How late they were and the number of past due items listed on a credit report
  • The amount of money still owed on delinquent accounts or collection items
  • How much time has passed since any delinquencies, adverse public records or collection items

A) How late they are

Creditors usually report late payments in one of these categories:

  • 30 days late
  • 60 days late
  • 90 days late
  • 120 days late+ or “charge off” (meaning they’ve signed off on considering your debt a loss).

How much does the “lateness” time period matter?

If you have a late payment right now do whatever you can do to pay that off because the later your payments are, the the bigger the negative impact will be.

If you have a late payment of 30 days or 60 days, the impact from those late payments will generally only be felt temporarily (unless you have an entire track record of late payments).

However, when it comes to payments of 90 days or more the effect can be much more severe.  

According to, “from a scoring perspective, a single 90-day late payment is as damaging to your credit scores as a bankruptcy filing, a tax lien, a collection, a judgment or repossession.”

Once you get into the 120 days+ late or charge off period, you risk getting additional marks on your credit report like collections and lawsuits/judgments, so there’s potential for even more damage to your score.

Thus, it’s very important that if you slip up, to immediately do whatever it takes to keep your payment from becoming even later. 

Credit scores are not affected the same 

Another thing about late payments is that the negative impact on your score works a little backwards from how you may have thought.

For example, one late payment could have a more significant impact on higher credit scores.

According to FICO data, “a 30-day delinquency could cause as much as a 90 to 110 point drop on a FICO Score of 780 for a consumer who has never missed a payment on any credit account.

So if you are going for a perfect credit score of 850, one late payment could set you back dramatically.

In comparison, a consumer with a 680 FICO Score and two late payments (a 90-day delinquency on a credit card account from two years ago and a 30-day delinquency on an auto loan from a year ago) would experience a 60 to 80 point drop after being hit with another 30-day delinquency.

Thus, if you’re really trying to preserve your high credit score then you’ve got to stay on top of your due dates because one slight slip-up could affect you dramatically.

B) Amount still owed on the accounts or collections

Your credit report will usually reflect how much is still owed on an account or whether or not you settled the amount.

If you pay off an overdue account in full the late mark will remain on your credit report. (Sometimes, you can negotiate with a collections agency or lender to remove the late payment entirely when you become up to date but that’s an entirely different matter.)

Some people are reluctant to pay their overdue payments since the negative marks still remain on their credit report. However, unless they are about to fall off very soon, it’s usually a good idea to pay those off for the following reasons:

  • The FICO 9 model doesn’t factor in collections that have been paid but will punish you more unpaid collections. 
  • Some lenders won’t feel comfortable if you have amounts owed on your accounts or to collections for obvious reasons
  • If the statute of limitations hasn’t passed in your state you could be sued for the debt which in addition to being a hassle to deal with, could add additional negative remarks to your credit score.
  • Collection agencies may continue to sell your debt to other agencies which can cause future negative remarks to post (I discuss that below)

I’ve heard somewhat conflicting reports of whether or not the amount in collections matters to your credit score.

First, it all depends on the credit model being used. FICO 8 excludes amounts less than $100 and it’s said that the amount won’t matter if it’s more than $100.

However, I know for a fact that banks will sometimes consider the amount in collections, so that’s always something to think about. 

C) How much time has passed

Even though your late payments will remain on your credit report for 7 years, they will slowly lose their negative impact on your score over time.

After about two to three years a late payment should have a substantially lessened negative impact on your score, assuming you don’t have a report littered with negative marks or new late payments. 

One thing that I don’t think is justified is that some lenders will consider the date that a debt or collections was sold when making their determinations.

If you’re not familiar, some collection agencies will sell off your debt to other collection agencies (for pennies on the dollar). When that happens your credit report will reflect the date that the debt was sold (the new opening date) and will also show the date of first delinquency (when you became late on a payment).

Some lenders will go by the new opening date and not the date of first delinquency which I think is a huge injustice. This is why I mentioned paying off your overdue accounts is often a good idea. 

Warning: If the date of first delinquency (as opposed to the new opening date) is changed this is against the law and you should report it ASAP!

New FICO 10 Model

Bigger impact from late payments

Per Experian, with the FICO Score 10 Suite, “the impact of late payments is more pronounced than with prior FICO Score versions.”

It’s not clear yet exactly how much worse late payments will be with the new FICO Score 10 model but it is clear that you will be penalized harder for late payments. 

Therefore, it is going to be more important than ever to make your payments on time.

Trended data

It’s worth noting that the new FICO Score 10Y model considers trended data. This means it will analyze your outstanding balances over the past 24 months.

According to Experian, “[t]his allows the credit scoring model to differentiate consumers who pay their credit card debt in full each month (known as “transactors”) from those who carry over, or ‘revolve,’ a balance from month to month.”

What is more, credit card debt is going to be treated more severely with FICO 10 than before.

So in the future it will be even more important to not just have on-time payment history but to show banks that you responsibly manage your credit lines.

By paying off your credit card balance in full each month you will look like a more responsible consumer and less of a credit risk.

How credit cards can help

Getting into the “credit card game” can actually improve your credit score because it can help you to build your payment history and potentially dilute any negatives on your report (or just continue the trend of making on-time payments).

For example, if you were to open a hand full of credit cards in a few months and make on time payments for a year, you’d be able to accumulate around 60 or more on time payments and from there continue to build up a positive payment history.

And so long as you keep your utilization low, your credit score should be improving since 65% of what determines your score will be benefited.   

How authorized users can help

If you are in need of a payment history you can always try to become an authorized user on an account that has a long payment history. You may not experience a huge rise in your score but it should still help you.


Do paid collections hurt your credit score?

Paid third-party collections should help your credit score for lenders using FICO Score 9 and FICO Score 10.

Should I pay my unpaid collections?

Paying your collections is a smart move that can help you avoid lawsuits and prevent a negative impact on your credit score for lenders using FICO Score 9 and FICO Score 10.

Final word

Your payment history should always be a top priority for you when it comes to your credit score. It is the category that carries the most weight and can be the hardest to fix since it sometimes just requires the passage of time.

Always do whatever you can to pay your bills on time and if you miss a payment try to mitigate the damage done by paying it as soon as you can. 

Chase Credit Journey Review (Free Credit Scores) [2020]

Keeping up with your credit score and report is crucial given all of the different ways that your credit score can impact your daily life.  Luckily, there’s a number of different ways that you can keep tabs on your credit score and report.

One way to do this is to utilize the free service known as Chase Credit Journey. In this article, I’ll tell you everything you need to know about Credit Journey, including why you may want to NOT use this service.

What is Chase Credit Journey?

Chase Credit Journey is a free online tool you can use to check your credit score and monitor your credit report for changes. The service is provided by Chase but you don’t have to be a Chase customer to use it.

What type of credit score does it provide?

Chase Credit Journey does NOT provide you with a FICO score. Instead, it provides you with a TransUnion Vantage 3.0 score. This is the same type of credit score provided by Credit Karma.

Vantage calculates their credit scores differently from FICO (though there are a lot of similarities). Sometimes the scores can be the same or similar but in many cases, the credit score differences can be quite extreme for some people. For this reason, you want to use some caution before relying on the Credit Journey credit score.

It’s very possible that your FICO score could be higher or lower than your Vantage 3.0 score so I would advise to check your FICO score, since most lenders use a FICO score to determine your credit worthiness. Below, I’ll show you how you can check your FICO credit score.

Tip: Use WalletFlo for all your credit card needs. It’s free and will help you optimize your rewards and savings!

Where can I get accurate FICO credit scores?

There are a few ways that you can get a FICO score.

Many find it easy to sign-up for and utilize that to get their FICO score (they offer a free 30-day trial membership). If you are just in it for the free score, make sure that you cancel your membership. 

Sometimes MyFICO offers a free trial so be on the lookout for that.

You can also get one free credit report from each of the three major credit bureaus (TransUnion, Equifax, and Experian) once every 12 months from But note that that is usually just the report (though I’ve been given the score once in the past before).

What about Chase Slate cards?

The Chase Slate card is one of the best balance transfer cards that you can get. And this card also provides you with a free FICO score so it’s an option to consider for checking your FICO score for free.

This means that if you have the Chase Slate you can check your FICO score and your Vantage score at the same time and easily compare the differences between the two models.

How often will my score be updated?

Your score will be updated on a weekly basis but you can check it as often as possible. Also, checking your credit score will not result in a hard pull so it won’t impact your credit score at all.

How are Vantage scores calculated?

The VantageScore Model is pretty similar to the FICO model but it has some key differences. It uses the same FICO range of 300 to 850 for the score and stresses many of the same factors as FICO — it just gives them different weight and has some slightly different criteria for calculating them.

Here are the 3.0 factors according to Credit Karma:

  • Payment history (about 40%)
  • Age and type of credit (about 21%)
  • Credit utilization (about 20%)
  • Balances (about 11%)
  • Recent credit (about 5%)
  • Available credit (about 3%)

Here are the factors for the FICO model.

  • Payment History (35%)
  • Utilization (30%)
  • Credit History (15%)
  • New Credit (10%)
  • Mixed Credit (10%)

So as you can see there is a lot of overlap between the two models. One of the key differences between the models is that closed accounts continue to age for FICO models but they don’t for Vantage models. This can result in huge differences in account history for folks like me who have opened and closed quite a few cards over the past few years.

Another big difference is that the Vantage models will combine related inquiries within a 14 day window. Meanwhile, newer FICO versions count multiple credit inquiries of the same type within a 45-day period as a single inquiry. 

Therefore, if it took you 3 1/2 weeks weeks to find an auto loan and you had multiple inquiries within those weeks, that could have had a bigger impact on your Vantage score versus your FICO score.

So Chase Credit Journey can be a nice way to see where your credit score stands generally but given the differences in the formulas, I would be hesitant to rely on it for any major credit decisions.

How to sign-up for Chase Journey

  • You can visit this link right here to enroll in Chase Journey

If you’re not a Chase customer, you’ll need to input your personal details, choose a username, and set your security questions and answers. After that, you’ll need to verify your identity

If you’re an existing Chase customer, you simply need to log-in using your Chase credentials. You’ll be asked to verify your email address but after that you’ll be able to log-in to your main dashboard area and click on an area to check your credit score on the right of your screen that looks like the image below.

Note: If you have a Chase Business account you will not be able to log in to Credit Journey through your Chase account.

Once you pull up Chase Credit Journey, you can view your credit score and an overview of your credit score. If you want to view a more in-depth look at your score then click on the “Credit Report” tab, which will then allow you to view all of your accounts.

Credit Journey disputes

There’s even a dispute center where you can follow links to initiate disputes for errors on your TransUnion, Equifax, and Experian reports.

Here’s what they recommend for disputing errors:

Step 1: Contact the creditor associated with the account

  • You should begin the dispute process by contacting the creditor responsible for the inaccuracy.
  • You can find the contact information for each of your creditors on this credit report.
  • Your financial institutions will be able to correct most minor errors over the phone and will prevent them from recurring.

Step 2: Contact each of the credit reporting agencies

You can dispute online with TransUnion.

You can also file a dispute via mail.

2 Baldwin Place
P.O. Box 2000
Chester, PA 19022

You can dispute certain items online with Equifax, if you have an active Equifax credit report file number.

You can also file a dispute with Equifax via mail.

P.O. Box 740241
Atlanta, GA 30374-0241

You can dispute online with Experian.

Credit Journey score simulator

The tool also has a score simulator that allows you to plug in variables to see how your score might be impacted in the future. For example, you can see what the effect would be if you had a credit card completely paid off. This isn’t a sure thing, however, because there are many different variables that go into calculating your credit score. Each factor can be impacted by many different factors so take the results with a grain of salt.

Credit Journey Alerts

Credit Journey will alert you to changes to your credit report that could indicate potential signs of identity theft, fraud or inaccuracies that could damage your score. These will be things like new accounts, hard inquiries, address changes, and other relevant changes.

You should be notified if they find anything but you can also check the Alerts tab when you log-in to see if there are any findings.

Credit Journey App?

While there is no Credit Journey App, you can view Chase Credit Journey in the Chase App. This means that you’ll need to be a Chase customer in order to take advantage of this feature.

How to unenroll

Final word

Overall, Chase Credit Journey can be a useful tool to see where your credit score is but it’s not a FICO score so you don’t want to rely on this score for the majority of lenders since they don’t use the Vantage model. Since it’s free, there’s no harm in checking it out and perhaps using it monitor your credit report for any unexpected changes, though.

How to Improve Your Credit Score Fast

The reality is that in most cases, there’s no quick fix to your credit score. When you make a mistake like missing a payment or falling into delinquency, you often just have to rely on time to pass in order for you to get your credit back on the right track. With that said, sometimes there are some relatively quick fixes. Here’s how to improve your credit score fast.

How long does it take to improve your credit score?

It generally takes a couple of months to see improvements to your credit score. But you can definitely improve your credit score in 30 days or less depending on factors, such as when statements close, new accounts report, disputes get resolved, etc.

Anything that happens within 30 days is generally considered “quick” for credit repair purposes. But more likely, rebuilding a credit score is going to take several months to a year (or longer) depending on what is holding your score back the most.

Get a “starter” credit card

Secured credit cards can help out tremendously.

If you have a poor credit credit score, you’ll likely struggle to get approved for many credit cards.

However, there are many credit cards available for people with bad credit like store credit cards, such as the Zales credit card.

You might only be able to get a secured credit card or a card with low limit, but if you successfully manage the card by making on-time payments, your score will begin to improve relatively quickly, depending on what factors are holding you down. Find out more about credit cards for bad credit scores.

Tip: Use WalletFlo for all your credit card needs. It’s free and will help you optimize your rewards and savings!

Get added as an authorized user

Adding yourself as an authorized user to a credit card can be a great way to raise your credit score immediately (relatively speaking).

Becoming an authorized user can improve your credit score by doing these things:

  • 1) Lowering your credit card utilization
  • 2) Improving payment history
  • 3) Increasing the average age of accounts
  • 4) Diversifying your credit (this factor plays a very limited role).

To maximize the benefits of being added as an authorized user, your goal should be to get added as an authorized user to an account that:

  • 1) Has as close to 0% utilization as possible
  • 2) Has flawless payment history and no negative reports
  • 3) Is older than your average age of accounts.

Depending on which of these factors is bolstered by being added to the new credit card, you score may jump anywhere from a few points to up to 20 points. I’ve even seen reports where some scores shot up by 50 points! In my experience, scores don’t improve much more than 20 points, but it all depends on the specific factors of your score that you’re addressing.

It’s really difficult to boost your credit score overnight but you can expedite the benefit of being added as authorized user by requesting the credit card to be expedited (if it’s free) and by activating it as soon as it arrives in the mail. You also should make sure the social security number is added so that it will report to the credit report.

Balance transfer to business credit card

The strategy here is to transfer a credit card balance to a business card because most business card balances to not report to your personal credit report. So while you’re still responsible for paying the balance, it’s almost like that balance doesn’t exist for purposes of your credit report.

A perfect example of this is the American Express Blue Business Plus Credit Card. It’s a business card offering 2X on all purchases for the first year, no annual fee, and best of all 0% APR on balance transfers for a limited time.

You’ll need to have decent credit to get approved for this card. However, if you have a low overall credit limit that has high utilization, this could be perfect for you, since it will effectively wipe away that utilization from your credit score. Again, just make sure that the business card won’t report to your credit report.

Consolidate your revolving credit into an installment loan

This is my #1 trick I offer to people who have high credit utilizations and are trying to learn how to improve their credit score fast. I’ve seen it work wonderfully for many people, too.

This is how this trick works.

Revolving accounts and installment accounts

For the most part, there are two different types of accounts you can have. Revolving accounts and installment accounts. Revolving accounts are going to usually be accounts from credit cards, department store cards, trade/credit lines at retailers, some personal loans, and so forth. Installment loans are typically large loans like student loans, car loans, home loans, etc.

The difference between these two is that revolving accounts directly affect your credit utilization while installment accounts do not. This is very key because your utilization makes up a whopping 30% of your FICO score.

So you may already see what can be done here.

Transfer from revolving to installment

By transferring your debt from revolving accounts to an installment account, you effectively remove your debt from the equation that affects your credit score utilization and therefore can often raise your score substantially if your credit utilization is what was holding you back. I’ve seen people raise their credit scores by 100 points overnight with this method by bringing maxed-out credit utilization down to 0%.  

I generally recommend for people to do this by going into local credit unions or banks that they have good relationships with. If you have a decent score, somewhere in the upper 600s, you probably won’t have a problem getting a personal loan for debt consolidation or just for “personal use.”

Make sure that you’re getting an installment loan and not a revolving line of credit. 

Goodwill letters

Your payment history makes up 35% of your score and is therefore the most important factor in your credit report, so it’s vital to take care of this factor.

If late payments or delinquencies are holding you back, then trying a goodwill letter might be one of the best ways to quickly improve your credit score.

Goodwill letters are short letters you send to the lender explaining to them your situation of why your payment was late. Whatever hardships you were experiencing at the time should be mentioned.  The success rate on these is mixed, but it’s worth giving it a try, since you have nothing to lose.

  • You can read my guide on writing goodwill letters here

If you have a late payment in collections, it’s rare that a collections agency is going to entertain your good will letter. In these instances, it pays to negotiate. I was able to get on the phone one time with a collections agency for a client and get the them to agree to remove the late payment entirely from the report and in exchange for a payment, which was about 40% of the total debt due. Again, this is another route that is met with mixed success and it can also be a little bit pricey, so it’s not for everyone.

However, if you go this route, I suggest you get something in writing from them guaranteeing the complete removal of that late payment from all credit bureaus that they have reported to. Otherwise, it’s your word against theirs.

Get errors removed

An Federal Trade Commission (FTC) report found that 21 percent of a representative group of US consumers found a “confirmed material error” in one of the credit reports issued by the big three credit bureaus. This means that you should also check your credit reports for errors. If you see anything you suspect is not accurate, you should definitely attempt to dispute it.

Depending on the severity of the error, you could see a major change in your credit score.

Final word

Overall, it can be difficult to raise your credit score fast. Often time is the only healer for your report. But I’ve seen these options work effectively to improve credit scores quickly for many people, so I know that they can work if you’re able to give them a try.

Is a 730 Credit Score Good for Credit Cards? [2019]

Do you have a credit score of 730 (or stuck to close to 730) and are you wondering what your approval odds are for credit cards or how to improve your score? In this article, I will tell you everything you need to know about whether or not a 730 is a good credit score for getting approved for credit cards. I will also give you some tips on how to improve your credit score and some advice on how far you need to improve your score.

Is a 730 a good credit score for a credit card?

Generally, a credit score of 730 will be sufficient to get approved for many quality credit cards. However, a lot more goes into the approval decision than a credit score. I will talk more about these additional factors below.

Tip: Use WalletFlo for all your credit card needs. It’s free and will help you optimize your rewards and savings!

What kind of credit score are we talking about?

Before jumping into the article any further, it’s important to clarify what type of credit score you are talking about. There are tons of different types of credit scores. Two of the most popular types of credit scores are FICO and Vantage Scores (Credit Karma). Since most lenders utilize the FICO model, I will focus on that one. 

You should also know that there are different types of FICO scores. Just like new software systems like Microsoft Windows are rolled out every few years, FICO every few years comes out with different editions of its scoring model.

For example, here are some of the previously released editions:

  • FICO 98 (1998)
  • FICO NextGen (2001)
  • FICO 04 (2004)
  • FICO Score 8 (2008)
  • FICO Score 9 (2014)

Each edition is implemented in order to more accurately predict the credit worthiness of consumers based on new developments in modeling, testing, and research. FICO also develops industry specific FICO scores. In addition to the “general” credit score, there are industry specific scores for the following:

  • Auto
  • Mortgage
  • Credit card 
  • Installment loan
  • Personal finance

These industry scores don’t typically follow the 300 to 850 scoring model of the general credit score so you might see perfect scores of 900. Since we are dealing with credit cards here, the credit card score would be the most relevant.

How good is a 730 credit score?

A 730 credit score is considered good and just a few points shy of being excellent by many. If we are talking about a FICO score, this score is about 20 points below what would be needed for the best interest rates.

A perfect credit score is technically 850, but in order to secure the best rates you actually don’t need a credit score that high. In fact, the real perfect score is likely a 760. 

Magnify Money, showed that “according to Informa Research, the lowest rates offered on various mortgage related loans are being offered to people with scores at or higher than 760. And, the lowest rates offered on various auto loans are being offered to people with scores at or higher than 720.”

I think that for optimal credit card approvals the minimum credit score somewhere around 750. So with a credit score of 730 you just need to bump your score up about 20 or maybe 30 points to get optimal approvals and rates, in my opinion. But in addition to increasing your credit score you also want to have a more robust credit profile. And below I will show you some different ways to build a better credit profile.

Tip: Use WalletFlo for all your credit card needs. It’s free and will help you optimize your rewards and savings!

Other factors considered for credit cards

Credit history

I think the most relevant factor beyond your credit score is how established is your credit history. You can have a score in the 700s but if you have no or very little credit history that score would not do you much good. On the other hand, if you have a couple of cards or credit lines that have been in existence for several years that is going to significantly help your chances. 

It also really helps your odds whenever you have credit history with the specific bank that you are applying with. For example, if you were applying for a Chase card and you already had a chase credit card opened up for the past five years that could be extremely beneficial. It could also help your odds if you even have a bank account opened with them.

Maxed out cards

If you have credit cards that are maxed out or with high balances that can really hurt your chances of being approved even if you have a decent credit score. Read more below about credit card utilization and how to improve it.

Lots of recent credit card applications

If you have applied for a lot of credit cards in the recent month or two that can also really help or hurt your odds. The reason is that you look like a credit risk in the eyes of the bank. 


Banks are going to be concerned with the stated income when determining your approval odds. Most banks don’t require you to prove your income that you state but some will require you to submit things like tax forms.

Income is mostly relevant for the more premium credit cards and for determining the amount of credit that you will receive. There are plenty of people who get approved for lower tier cards with low incomes, so you don’t have to be making six figures to get approved for good credit cards.

How can I improve my credit score

In case you need a refresher, here’s how your FICO score is calculated.

Your FICO credit score is determined in the following way:

  • Payment History (35%)
  • Utilization (30%)
  • Credit History (15%)
  • New Credit (10%)
  • Mixed Credit (10%)

Payment History (35%)

Payment history is the #1 factor for determining your credit score.

Late payments will stay on your credit report for 7 years, although some bankruptcies will remain on your report for up to ten years!

Luckily, the negative effect of late payments and other negatives begins to lessen as more times passes, so although it might stay on your report for 7 years, the effect will usually only be felt for a limited amount of time (i.e., a few years).

How much a late payment affects your credit score depends on a mix of factors, including:

  • How late they were and the number of past due items listed on a credit report
  • The amount of money still owed on delinquent accounts or collection items
  • How much time has passed since any delinquencies, adverse public records, or collection items

If you want to climb into the high 700 for your credit score you need to do everything in your power to maintain it 100% payment history. One slip-up of a 30 day or 60 day late payment could easily drop your score well into the 600s. It could take a long time to get your score back up so do everything you can to monitor your payments.

Unfortunately, if you think your payment history is holding you back there’s really not too much you can do expect wait. You could request for a goodwill adjustment and see if you could get the negative remarks removed but the success rate for those are pretty low. Still, it never hurts to try.

Utilization (30%)

Utilization is your credit to debt ratio. You find this by dividing the amount of debt you have by your total credit limit. So for example, if you have a $20,000 total credit limit and owe $20,000 in debt, then your utilization is at 50%.

This can be one of the easiest factors to improve. By simply getting added as an authorized user to an account with a high balance and zero utilization you can easily drop your utilization down considerably. Just make sure that the person that adds you is responsible and won’t ruin your score by maxing out that card.

You could also consider opening up an installment loan and moving your revolving debt into an installment loan. That will essentially remove your debt from your Credit utilization allowing your credit score to improve.

And finally, something else that you could consider is opening up a business credit card that does not report to your personal credit report. In some cases you might be able to do a balance transfer to a business credit card and that debt will no longer show up on your personal credit report and therefore your utilization should drop.

Credit History (15%)

The credit history category consists of the of the following factors:

  • Longest opened account
  • Average age of account
  • Time since newest account
  • Time since each account was last used

The most important of these factors is the age of the longest opened account while average age of accounts is second. In order to preserve this you want to keep your old account open as long as possible. Another tactic can be to open up business credit cards when pursuing rewards so that you don’t open a lot of new accounts and decrease your average age of accounts.

Adding yourself as an authorized user can also help your credit history as well.  

New Credit (10%)

This category is most known for its effect felt from hard inquiries.

Hard inquiries result when your credit is pulled for review by lenders and certain other institutions and they differ from soft inquiries in the latter don’t affect your credit score.

Other factors besides hard inquiries in the new credit category are:

  • How many new accounts you have
  • How long it’s been since you opened your last account

If you’re trying to preserve or build up your credit score you then refrain from applying for new cards. Each time you apply for a new line of credit your score will likely drop around five points although it can vary. You can mitigate this effect by searching for banks that combine credit inquiries when you apply for multiple credit cards at once. 

Mixed Credit (10%)

This category evaluates your overall “mix” of credit lines.

So for example, it wants to see if you have a diverse range of credit consisting of different types of credit lines like student loans, auto loans, home loans, credit cards, etc. If you were trying to improve your credit score this is really the least concern for you.

Yes, it can help if you end up opening up an auto loan or mortgage and you diversify your credit mix. But you shouldn’t go and pursue something like a massive loan like that just to try to improve your score a few points. Instead, this is just the type of thing that if it happens great, if not, then just try to wait until you can improve this on your own organically.

Final word

A credit score of 730 will allow you to get accepted for many credit cards. But the approval decision comes down to much more than just your credit score number. You need to make sure that you have a robust credit profile with plenty of credit history and low utilization so that you are not seen as a credit risk. 

9 Ways Credit Scores Affect Your Daily Life & Why They Are Important

The focus on UponArriving is obtaining some of the best rewards credit cards and so when I talk about the importance of credit, that’s usually the #1 reason why. But it’s good to be reminded of all the ways that your credit score can affect your daily life.

Some of these reasons involve being able to save tens of thousands of dollars in interest while others involve enjoying a higher quality of life. So here are several reasons why your credit score is important and how your credit score can affect your daily life.

Tip: Use WalletFlo for all your credit card needs. It’s free and will help you optimize your rewards and savings!

1. Mortgage Loans

This is one of the biggest reasons why you want to have a solid credit score.

First, you might not even be able to get approved for a mortgage if your credit score is very bad.

Second, if you do get approved, a lower credit score can cause you to only get approved for higher interest rates. When it comes to mortgages, the difference in interest rates could end up costing you tens of thousands of dollars. And that’s no exaggeration. 

NerdWallet showed how slipping up on your bills could cause a 0.50% increase in interest rates on a mortgage that could end up costing you over $30,000! And that’s just a 0.50% increase. With more credit report hiccups you could easily end up costing yourself much more over time.

So in terms of financial consequences for home loans, the importance of maintaining a solid credit report can’t be reiterated enough.

2. Auto loans

The same logic applies to getting auto loans. Even if you get approved, you might miss out on better opportunities that could have saved your thousands of dollars in interest or perhaps even allow you an interest fee loan on a car. 

I used the MyFico Loan Savings Calculator to see what the savings would look like on a $30,000 loan over a 48-month repayment period based on credit score.

The total interest paid for a 720+ score was $2,115 but for scores below 690, that total jumped to $4,167 in total interest (over $2,000 more). And that’s just a 30 point difference in the credit score. Things get much worse if you drop below 620. 

3. Home and auto insurance rates

Both your home and auto insurance rates can be negatively affected if you have poor credit. In fact, homeowners with poor credit pay 91 percent more for homeowners’ insurance than people with excellent credit, according to a report.

In some states, such as California, Massachusetts, and Maryland insurers  are prohibited from using credit to calculate homeowner’s insurance premiums but in states where it’s allowed, it can be a costly problem, since about 85% of home insurers use credit-based insurance scores in states where it’s allowed.

And in states that don’t prohibit using credit to calculate auto insurance premiums, 95% of auto insurers use credit-based insurance scores, according to the National Association of Insurance Commissioners

4. Housing approvals

As many as 65 to 70 percent of landlords may pull the credit report and credit score of a potential tenant.

If you’re searching for an apartment or other housing you might be limited due to your credit score. If your credit is low, you might require a co-signer or be forced to put down a hefty deposit. In addition, this means you might be forced to live in areas that you’d rather avoid and might mean a lower standard of living.

5. Utilities, phone service, etc.

When it comes to utilities and phone service applications, your credit score is often checked. With horrible credit, you might be stuck with month-to-month pre-paid contracts with inferior service providers and have to deal with the results of that.

Or, just like with housing, some might require you to put down a large deposit to secure their services. Also, you might miss out on deals since consumers with the best credit often get better pricing on new phones than those with lower credit scores.

For example, T-Mobile stated 63 percent of Americans don’t have the 750 credit score required for the best deals in the cellphone industry. Typically, when you see language about “qualified customers” that’s an indication that a promotional offer depends on your creditworthiness. 

Cell phone providers like T-Mobile appear to be becoming more accommodating to customers with lower credit scores so it’s not all doom and gloom if you have a poor credit score, but obviously you don’t want to rely on the accommodation of providers forever. 

Photo by Mike Mozart.

6. Employment

According to LearnVest, “47% of employers run credit checks on job candidates primarily to reduce the potential for theft and embezzlement, reduce liability for negligent hiring, and assess trustworthiness.” These checks are more common in industries that deal with money, healthcare, the government, and any kind of sensitive data or information that might involve a security clearance.

By law, employers are required to obtain explicit written permission to check your credit. And they likely won’t actually view your credit score, but a modified version of your credit report called an “employment screening” that omits some details. 

Still, if you have many negative remarks on your credit report, you might run into trouble since it could signal to your prospective employer that you might not be the trustworthy and responsible candidate they are searching for.

7. Student loans shed light on how credit scores affect student loans and it differs for federal loans versus private loans. 

Federal student loans 

For federal loans you usually don’t have to stress too much because “Stafford, Perkins and PLUS loans do not depend on your credit score.” The Stafford and Perkins loans are available entirely without regard to your credit history, which is pretty remarkable considering how huge those loans can be. 

However, the PLUS loan requires that you don’t have an adverse credit history, such as “being more than 90 days late on any debt or having any Title IV debt within the past five years subjected to default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off.”

Private student loans 

Things are much more serious when it comes to private student loans, though. In the case of private loans,”borrowers with bad credit scores may have monthly payments that are 20% to 40% higher and pay two-thirds to 100% more interest over the lifetime of the loan as borrowers with excellent credit scores.” That’s a huge discrepancy. 

Finaid also remarks that most education lenders break their interest rates and fees into five tiers, based on the borrower’s credit score. “About 20% of the borrowers get the best rate, followed by 35%, 20%, 10% and 15%. Each tier has an interest rate that is 1% or 2% higher than the previous tier.

This means that borrowers with the worst credit scores can have interest rates that are 5% to 6% higher than the interest rates charged to borrowers with excellent credit. The fees are also higher by as much as 9%, although some lenders roll higher fees into the interest rates.”

So while you can get by with having not-so-good credit with federal loans, getting private student loans can be a completely different ball game.  

8. Relationships

Bankrate recently conducted a survey and found that  “nearly 4 in 10 adults say knowing someone’s credit score would affect their willingness to date that person.” And other reports have found strong correlations between strong credit scores and strong relationships. 

I know a number of people who would definitely prioritize someone’s credit background when choosing to date someone since it many cases it can be indicative of responsible that person is in other aspects of their life.

Obviously, if you’re into someone, you’re probably into someone regardless of a 3-digit number, but I think that having a strong credit score can do nothing but help your chances in the dating world and beyond. It’s probably only a matter of time before credit scores are included in online dating profiles (if they aren’t already).

Plus, if you and your partner have solid credit scores, you can get much much further in travel hacking. 

9. You will feel better

Having a good credit score has improved my sense of well-being and that’s not just the case for me. 

Credit Karma in partnership with professors at the University of Virginia, surveyed more than 1,000 Credit Karma members and the found a strong positive correlation exists between credit score, an affinity for saving, and a sense of wellbeing.

Obviously correlation does not prove causation but I think it’s definitely true that a rise in well being accompanies an increased credit score.

Years ago, I dreaded checking my credit score and always just assumed the worst anytime an outcome depended on my credit. Now, it feels great to know what to expect when I check that FICO score and to know that it’s in good shape. I feel more in control of my life and don’t feel like I’ll ever be held back in life by what might be found on my credit report.

If you’re credit score isn’t where you’d like it to be, take that as a worthwhile challenge to accomplish something that will improve your life in many different ways.

It may only require a few months or it might take a year, or two, or three or more, depending on your circumstances, but repairing your credit report and gaining control of how things in your life are affected by your credit can be a very rewarding experience, both financially and psychologically. 

Final word

Your credit score and report have the potential to affect you in almost every walk of life. Just about any major or minor financial commitment can be affected by them and end up costing you tens of thousands of dollars in the long-run not to mention a lot of stress and headache.

Thus, while maintaining a high credit score is crucial for award travel, it’s much more important to take care of your credit for the various needs you have in life. So do what you have to do to improve your credit score and just think of travel hacking as a an added bonus. 

Cover photo:

Guide to Writing Goodwill Letters

Goodwill letters to creditors are the first line of defense for many trying to rebuild their credit by getting negative remarks like late payments removed. Goodwill letters are simple letters that just about anyone can author but their success is also very hard to predict. Still, because they are so easy to create and send out it’s often worth giving goodwill letters a shot.

What is a goodwill letter to a creditor?

A goodwill letter is your opportunity to send in a short and sweet letter to request for your lender (or sometimes collection agency) to remove late payments from your credit report. The reasoning for the request is based on reasons that have nothing to do with any mistake made by the lender. Instead, you are requesting for negative information to be removed based on the “goodwill” of the lender.

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What goodwill letters are not meant for

Goodwill letters are typically not effective for certain types of derogatory marks, such as bankruptcies, liens, and judgments and are mostly used to remove late payments. Also, you generally do not want to send in a goodwill letter for late payments or charge offs that are not paid in full.

As you could imagine, a lender is not going to be feeling very gracious when you haven’t even paid your outstanding balance. If you’ve settled an account you might still give it a try but goodwill letters are best used on late payments for accounts paid in full.

What needs to be in a goodwill letter?

Goodwill letters do not need to be long but they do need to include some specific information in order to maximize your chances of getting negative remarks removed.

Include your identifying information

You want to make the lender’s job as easy as possible when sending in these letters. Start by properly formatting your letter to include your name, address, telephone number, and all of your account details for that lender.

If you have multiple late payments, be sure to identify the exact months and years that were late and by how many days they were late. It’s often helpful if you can print out a portion of your credit report to show them how the late payments are showing on your credit report, although this is not necessary.

Explain your situation

Your goodwill adjustment letter is your chance to show a lender why they should remove the late payments from your credit report.

This is usually done by explaining the circumstances around why your payments were late. For example, if you experienced hard times (a death in the family, loss of job, medical condition, etc.), you will want to bring up this information. You can also add information as to why it’s so important for the late payment to be removed (maybe you’re trying to buy a home, a vehicle for work, etc.).

When including personal details about your situation, disclose all of the pertinent details to build your case but try not to be overly dramatic so that you can retain credibility with whoever is reading your letter.

If you have a long track record of making payments on time with this lender then you absolutely want to highlight this by showing them how responsible you’ve been in the past. Let them see you as a valuable customer who simply had an anomalous slip-up that won’t happen again.

Sometimes you can express your willingness to do things like signing up for auto payment to show the lender how sincere you are about responsibly managing your account.

Strike the right tone

Try to make yourself sound likeable and reasonable (hopefully this isn’t too hard).

Go for a pleasant and apologetic tone. Avoid trying to “sound smart” by using an unnecessary amount of big words and don’t word your letter too sternly. That last thing you want to do is sound like a know-it-all, entitled, or like you’re taking your anger and frustration out on the lender.

Keep your goodwill adjustment letter short

You also want to just keep these goodwill letters short. Lenders see these letters all the time and sending in an entire dissertation on why your late payments should be removed is only going to increase their load and not your chances of removal. As a rule of thumb, keep these letters to a few paragraphs and at a maximum one page.

Manage your expectations

When sending goodwill letters, it’s important to not keep your expectations too high. Lenders are obligated to report late payments to the credit bureaus and are under no obligation to remove your negative information unless there is some type of error with the reporting. So give it a try, hope for the best, and consider it a surprise if it works in your favor.


There aren’t many drawbacks to sending in a goodwill letter but there are a few potential negative outcomes that could happen. These drawbacks are pretty rare but it’s still a good idea to be aware of the potential negative aspects of sending in such a letter just in case you have bad luck.

Admitting responsibility (on the record)

If you think there might be any grounds for disputing the late payments as inaccurate, you want to be careful about taking responsibility for the late payment. Sometimes lenders will use your goodwill letter against you as an admission of fault for a late payment. In the case of student loans where you might have ground to argue that a deferment or forbearance was not processed properly, this is something to be aware of.

Negative corrections to your report

If your negative mark is only reporting to one credit bureau it’s possible that the lender will see this when receiving your report and actually decide to “update” your report so that all three credit bureaus will show the negative remark. Or perhaps there were other late payments that the lender didn’t report but will discover upon reviewing your file.

Account deletion

It’s even possible that a lender could delete your entire account after processing your goodwill letter (this is more common with accounts that are already closed). If this happens, the removal might boost your score but you could lose the benefits of having the older account on your credit report.

Comment on credit report

There’s also a small chance that your goodwill letter could lead to a dispute comment on your credit report. Sometimes these comments can force FICO to treat your accounts a little differently. For example, FICO might ignore an account while it’s disputed and that could affect things like your utilization. Also, if you’re seeking a mortgage, these types of comments can sometimes cause lenders to deny you.

Send the goodwill letter

You can send your goodwill letter via mail, email, fax, online log-in portal communication, or even call in and speak to someone.

Sending a letter via mail is probably the standard procedure for sending goodwill letters. Some like to send their letters via certified mail but sometimes this can appear like you’re gearing up for a legal confrontation and could cause someone to respond defensively toward your letter.

I would personally prefer to mail my letter (non-certified), fax my letter, or send it in via email just to send out the right vibes.

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Who to address the letter to

When you send the letter to a lender you can send it to many different addresses.

Many start by sending their goodwill letters to the address found on their bills or an address for things like “card member services” but these letters will often be processed by entry level agents who many not have authority to handle your issue. You can also use the creditor’s address found on your credit report. However, many people are increasingly addressing their letters to corporate recipients.

To do this you can search a company’s corporate website for contact information and look for a “contact us” section or similar where you can find both mailing and email addresses. Feel free to take down all of the relevant email addresses you find on a corporate website and address separate emails to all of them. You never know who may or may not respond.

You can also use corporate directories like,,, and others to find contact information. Some of these might not always be updated so you’ll need to follow up.

On the company corporate websites you can sometimes find information for departments like card services. If you can’t find an individual to send your letter to then sending it addressed to a relevant department in the executive offices is still a good option. The key is to continue to try different departments and personnel until you get a response. Eventually someone will likely respond. 

Some people also have luck with other methods like email guessing which you can read more about here.

The response

Sometimes you will never get a response from the lender. Instead, you’ll need to monitor your credit report to see if any changes are made to your credit report.

Goodwill letter sample

There are hundreds of sample goodwill letter online. I recommend searching for a specific type of goodwill letter that relates to your unique situation. If you can’t find one then simply customize a sample letter by including the details of your situation. Here’s a good resource for letter samples.

Avoid drafting a cookie-cutter, cut and pasted letter that an executive will see right through. Put some originality into it along with a personal touch to make it more effective.

Final word on goodwill forgiveness removal letter

Overall, there’s never a guarantee that these goodwill letters will work but it’s usually always worth giving them a try because of how easy they are to write and the low risk of something going wrong.

What to Know About Getting Credit Limit Increases

Credit limit increases are an easy way to help decrease your credit card utilization and give your credit score a boost. With a credit limit increase, a bank will increase the limit for you on your credit card so you’re able to free up more credit but also benefit your utilization. And these are issued more often than you think, a March 2017 poll conducted by found that 89 percent of cardholders who requested a higher credit limit received one.

Hard pull inquiries

One thing you need to be aware of before requesting one of these is whether or not the bank will issue a hard pull on your credit report before they process the increase, since a hard pull could decrease your credit score by several points. Many banks will make a hard inquiry when you request a credit limit increase but not all of them will. If they do, then you’ll have to decide if another hard inquiry will be worth the increased credit limit (assuming they approve it).

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I suggest waiting at least six months before requesting a credit limit increase on your credit cards. It’s possible that you could get one sooner but many issuers are reluctant to grant you an increase until you’ve shown them some positive payment history of around six months.

How much to request

These increases are usually relatively small but generally people request about a 10% to 25% increase. It’s possible that you could be given more than that (I was once given a 50% increase) but try not get too crazy when requesting the credit limit increase. If you ask for too much, they might deny you altogether. If your request for a credit limit increase is denied, plan on waiting at least another 90 days before requesting one a second time.

How to request  

You can sometimes request these online when you log in to your account to manage your credit cards or you can just call up the bank and request it.  If you call, be prepared to explain to a representative why you want the increase.

Avoid sounding desperate and try to bring up things like your solid payment history with the bank to persuade them to give you the increase. If you recently got a raise or are in a better financial situation than you were when you opened the card you can bring that up. Also, if you’re planning on making some larger purchases in the future (weddings, remodeling, vacations, etc.) that can also be a good reason. (Just watch out because some banks will sometimes offer temporary credit limit increases to assist you with single purchases.)

Your goal is just to leave the bank agent with assurance that you’re going to be responsible with the increased credit limit and aren’t requesting one because you’re struggling to make ends meet.

Auto increases

Banks will sometimes increase your credit without you even asking. If you have a low credit limit and are constantly coming close to hitting that limit and are constantly paying off your balance, there’s a good chance you might get a credit increase. However, if you’ve been waiting for over six months, it’s probably time to call them to inquire about it.

Consider transferring credit

If you have more than one credit card with a bank there’s a possibility that you might be able to transfer credit from one card to another. Not all banks allow this and sometimes these come with restrictions but banks like Chase will usually allow you to transfer from one credit line to another. By doing this you can improve the individual utilization on one of your lines without incurring a hard pull (but always be sure to verify that there won’t be a hard pull).

Don’t wait until it’s too late

One final tip, if you want to bump up your credit line try to ask for the bump when you don’t need it. If you wait until your credit card is maxed out or when you’re only making minimum payments then the bank will probably be less likely to raise your credit limit because they will see you as more of a credit risk. Also, it’s a good idea to actually use the card you’re going to request a credit increase for. Otherwise, a bank may see no need for your increase and deny you.

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