Credit Score Myths Every time you go to the store or go online and apply for a credit card your credit score is pulled. Your score is a combination of factors, including your open line of credit, your ability to pay that credit, and your failure to pay past amounts, as well as many other factors. In fact there are so many factors that many myths have come about in regards to credit reporting. This article from www.creditcardappfinder.com explains several of those myths. Today we will take a look at the wrong information that has come about: MYTH #1: Different Formulas are used by different agencies.
The three major credit bureaus (Equifax, TransUnion and Experian) all use the same information to form your score, hence the fact that it's called the FICO score rather than by different names. The main difference is that each agency may track your information differently, for instance there records may go back further, or they may have more accounts on record. This occurs because many merchants only apply your accounts to one or two of the companies, therefore you may have different scores based on that reporting. MYTH #2: "I closed an account, now my credit score will increase." Actually, closing an account can hurt your score. The reason for this is simple. Your score shows your ability to manage a certain line of credit, if you begin closing accounts, it may reflect to certain creditors that you have overextended your credit and therefore need to close accounts. Consequently, if you do need to close account, close your newest accounts first, the reason for this is that your older accounts have history, and if it is a good history it shows your ability to pay overtime, and therefore has more of a weighted balance on your ability to apply for more credit in the future. MYTH #3: Shopping around for a mortgage or car loan will hurt my score. Here is an easy tip to follow: "If you are looking for a home or auto loan, shop around all at once." Multiple inquires on the same subject within a short period of time will only count as one inquiry. So do your comparison shopping over a short period of a couple days if possible. MYTH #4: Paying off my debts will instantly repair my credit score. Your credit score is a measure of your past performance, not your current debt load. So if you start to pay your bills on time, that will eventually bring your score up. It can be a long process, but pay your bills, and if you receive a car loan or a home loan and make consistent payments your score will increase more quickly as well, installment payments are a great aspect to show on your report. MYTH #5: Companies can fix my credit score for a fee. No company can "Fix your score in 30 days" or any other amount of time. At least not legally, some credit repair companies submit inaccuracies that don't exist on your report to the major agencies in the hopes that they don't respond in 30 days and therefore must delete the records. However, if the information is legal and they do this, it is ILLEGAL. The best thing you can do is look for inaccuracies and dispute them with the agencies. MYTH #6: Requesting your own credit report will affect your score. You can't damage your credit score through your own inquiries, nor can an employer or a landlord, these are considered "soft inquiries" and are listed by the agencies but ignored when compiling your credit score. |
