Several factors determine your credit score, but salary and income are not among them. However, if you suddenly lose your job or other income sources, your score may suffer indirectly, as we’ll explain below. But first, let’s discuss how you get a credit score.
FICO, the dominant player, created the first consumer credit scoring system in 1989. Others joined in, including the second-largest system, VantageScore. About 85% of consumer creditors use FICO, which has a scoring range of 300 (worst) to 850 (best).
The three major credit bureaus, Equifax, Experian, and TransUnion, collect monthly data from lenders, credit card companies, and other information suppliers regarding consumers’ use of credit and payment activity.
The bureaus record, tabulate, and disseminate the results through several products, including credit reports (which provide a 10-year history of your use of credit) and credit scores. Therefore, you have three reports and scores, one from each credit bureau. Slight differences among the three scores stem from differences in each bureau’s data collection and calculation methods. The average US credit score in 2022 is 716, a five-point jump over the past two years.
The FICO system uses five factors to calculate your credit score:
Although missing from the five FICO factors, income disruptions can hurt your score indirectly if you have trouble paying your bills and your debt levels rise. This is an excellent reason to put aside six months of expenses into an emergency fund, just in case you separate from your job.
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