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Does Your Credit Score Care Where You Shop?

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With all the information our actions generate — from websites we visit, places we travel to and things we buy — it’s no wonder why people worry about Big Data affecting their finances. So you may wonder: Does what you buy affect your credit score?

Credit reports and credit scores, two major components of your financial well-being, are built upon several data points, like whether you make on-time credit card payments, how much debt you have, how often you apply for credit, and so on.

What that means is: As much data as credit bureaus collect, your credit reports aren’t exhaustive summaries of your financial history. While data furnishers report your loan types and balances, they don’t go into the details of how you’re using the credit. Whether you take out a $5,000 personal loan to consolidate credit card debt or deck out your apartment, all that really matters is how you manage the loan, not what you’re using it for. (Of course, you shouldn’t use a loan in a way that violates its terms, like using student loans for non-educational expenses.)

“The FICO Score is blind to transaction type,” said Anthony Sprauve, senior consumer credit specialist at FICO. He elaborated in an email: “That information isn’t reported by creditors to the credit bureaus, so it isn’t contained in a consumer’s credit report and therefore FICO doesn’t see it.”

In other words, there’s no need to worry about how the items on your credit card statement will reflect on you as a consumer, only that you pay that bill and use your available credit wisely.

Where you shop may not affect your credit standing, but different types of credit certainly do. For instance, if you use a credit card to finance a large purchase, rather than take out a small installment loan for it, that decision could affect your credit. You’ll drive up your credit utilization by adding a significant amount to your outstanding credit card balance, and if you don’t have other installment loans, adding one to your credit history could be beneficial to your account mix.

Account mix and credit utilization have a significantly different impact on your credit standing, so choose your payment method carefully. There’s also the fact that credit from a financing company and credit from a bank is assessed differently in credit scoring, said Rod Griffin, director of public education for Experian.

“There is no record of what you buy or where you make charges in your credit history at all,” Griffin said. “If you’re talking about different types of credit, that can have a bearing in credit scores but where you shop or what you buy doesn’t reflect risk — what reflects risk is how you repay that loan.”

To figure out what financing options make the best sense for you and your credit, you’ll first want to know where your credit stands. You can see two of your credit scores for free on Credit.com, and from there you can explore your best options for improving your credit or qualifying for credit with your current standing.

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