Credit score tips for Arizonans struggling to reduce debt

2014-01-06T00:00:00Z Credit score tips for Arizonans struggling to reduce debtBy Russ Wiles The Arizona Republic Arizona Daily Star
January 06, 2014 12:00 am  • 

Arizonans made some important strides in getting out of debt last year, which likely improved the credit scores of tens of thousands of people around the state.

Bankruptcy filings were running 19 percent lower through the first 11 months of 2013, reported the U.S. Bankruptcy Court in Phoenix, which hasn’t yet released numbers for December.

Also, fewer homeowners were delinquent on mortgages: Arizona showed one of the biggest improvements nationally in this measure. One year earlier, 5.1 percent of homeowners here were 60 or more days past due. That’s now down to 3.3 percent, said credit-researcher TransUnion.

Those and other developments suggest that people in Arizona are doing a better job handling debt, which will help improve their credit scores. High scores make it easier to obtain loans on favorable terms and can make it easier to rent an apartment, obtain auto insurance and more.

More consumers seem to understand the factors that go into scoring — the key one being an ability to pay bills on time. There are a lot of other factors that go into credit scores — and quite a few that, somewhat surprisingly, don’t have any impact at all. Here are four not-so-intuitive things that you don’t have to worry about if you hope to boost your score over the coming 12 months:

Debit-card use. Many experts suggest that debt-strapped individuals use this form of payment rather than credit cards. Since debit cards are tied to money in your bank account, you can spend only what’s available. Also, there’s no way to dig a debt hole with debit and no interest payments along the way.

But by the same token, debit-card use doesn’t build a credit history because there’s no borrowing involved. “For consumers looking to improve their credit scores (through responsible use), debit cards won’t help,” said Credit.com.

Changes in income. Clearly, you need some type of salary or other cash inflow to make payments on your debts, but credit-scoring models don’t factor in income directly. So if you expect a raise in 2014, that by itself won’t improve your credit score, and a pay cut won’t hurt.

But although credit scoring isn’t directly affected by income, certain types of loan applications will be. It might be tough to qualify for a mortgage, for example, if you just received a layoff notice.

Loan rejections. If you get turned down for a loan, that in itself won’t hurt your score. Just be sure to find out the reason for the denial and take corrective action if you can, suggests Credit.com.

Getting accepted for new loans could hurt your score a bit because it raises the amount of debt in your name. Also, credit inquiries or applications for new loans can lead to a slight scoring decline. But rejections per se aren’t an issue.

Getting married. Tying the knot won’t in itself ding your credit score. “The simple act of signing a marriage license isn’t going to harm the credit score you had going into the relationship,” said Credit.com. “You won’t wake up the day after you get married and find a drop in your score.”

That said, your new spouse’s poor credit score could affect your ability to get a joint loan in the future, and his or her spending problems could cause debt problems and spark plenty of money bickering later. So it might be wise to ask to see your partner’s score before you walk down the aisle together.

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