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Lies, Myths, and Half-Truths About Your Credit Score


Posted on October 11, 2010

 

In credit repair, it’s important to have all the facts. Misinformation could make the difference between credit repair success and failure. As you research credit, you might come across some information that’s half true, some that people believe to be true, and some that are outright lies. Read on to find out what’s real and what isn’t real about your credit score.

Myth: You only have one credit score.

Truth: You have several credit scores. There are three credit bureau and you have a credit report at each of them. Each of the credit bureaus has their own credit scoring model, so that makes nine credit scores (3 credit bureaus X 3 scores = 9). Then, there’s the more well-known FICO score. You have three FICO scores one for each credit bureau. Some of your creditors and lenders may use their own credit scoring models making the number of credit scores you have impossible to count.

Half-Truth: Your credit score ranges from 300 to 850.

Some of your credit scores, like your FICO score, range from 300 to 850. The VantageScore, which was created by the three bureaus, ranges from 501 to 990, and also gives you a letter grade for your credit score.

Myth: Checking your credit hurts your credit score.

Nope. You can check your credit score and pull your credit report as much as you want and your credit won’t be affected. The exception is when you have a lender run your credit, for example, when you’re getting pre-approved for a loan. Don’t have the bank check your credit score for curiosity purposes. Instead, check your credit score yourself through myFICO or one of the credit bureaus.

Lie: Employers check your credit score.

While it’s true that some prospective and current employers will check your credit to decide whether to hire you or to give you a raise or promotion, they don’t check your credit score. Instead, they check your credit report. Employers won’t check your credit report without your knowledge because law requires them to tell you in advance.

Lie: Being denied for credit hurts your credit score.

Being turned down for a credit card or loan doesn’t hurt your credit score. Instead, you were probably turned down because of your credit score. Whether you’re approved or not have no bearing on your credit score, positive or negative. What does affect your credit score is applying for new credit and opening new accounts. Several credit applications within a short period of time will bring down your credit score. Opening a new account lowers your average credit age, which is 10% of your FICO score.

Myth: Your credit score is merged when you get married.

Even in community property states like California and Arizona where ownership of marital property is joint in marriage, you still maintain separate credit scores. The only time your spouses credit directly affects yours is when the two of you share credit card and loan accounts. In that case, payments and non-payments made on those joint accounts will affect both spouses credit scores. Other than that, your credit is your own.

-Other Common Myths-

Open Lots of Account to Improve Your Credit

While it may seem like a good idea to have a lot of accounts to improve your credit score, doing so can actually hinder it. Additionally, other creditors may not be very thrilled with the credit limits you carry, especially if you are tempted to max out those many lines of credit. It is much better to maintain a few diverse accounts like a personal loan or mortgage along with one or two credit card accounts that are active and paid on time.

Stop Using Credit Cards to Get a Score Boost

The only time not using a credit card to aid your score is good advice is when you are tempted to spend too much. The reality is your score is based on how you use the credit available to you. If you have cards with no activity, it won’t help your score. Plus, unused credit card accounts may end up closed by the issuer for inactivity which will lower your score. The better tactic is to use your cards regularly for small, reasonable purchases and pay off the balance in full before the end of the billing cycle.

You Can Erase Old Collection Debts Easily

While it is true that paying off debts will boost your score over time. However, if you have had accounts that have been turned over to collections or a judgment filed against you, it will be more difficult to get those marks removed from your credit report.  You should make all attempts to pay off old debts and be free and clear but don’t expect a miracle on your credit report. Only time will help erase debt mistakes.

Avoid Credit Counseling If You Want a Good Score

The FICO scoring system no longer factors in a consumers use of a credit counseling agency. Your credit history report may reflect your involvement with third-party assistance but your score won’t be lowered. If you have not be able to effectively handle your income and debts, seeking outside help may be the course of action you need to take to get back on financial track.

Credit Repair Services Will Net Me a Good Score

There are many companies now advertising help with repairing credit scores ‘instantly’. Truth is no one can magically obtain better credit without time and effort. There is no easy button for credit score repair and no company, no matter how much you pay them will be able to help you do it. The best advise is to avoid these companies completely and work to negotiate and pay off your debts on your own. You’ll save yourself a lot of money and aggravation. It will take time to heal low credit scores.

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