Credit reports are not really a mystery but there’s often quite a lot of misinformation about them. While it is important to have a good credit score, it’s equally important not to believe everything you hear about them because it could send your credit rating on the wrong course.
Here are 10 popular myths about credit reports and credit scores.
1 – Checking my credit report will reduce my credit score.
Many people believe that checking their credit report and credit score would hurt it. But looking at your own credit report or credit score is quite harmless. If a lender checks your credit report and credit score it results in a “hard inquiry,” which causes a small but temporary drop in your credit score. However, when you check your own credit report it’s called a “soft inquiry,” and it has no effect on your score.
2 – I think I have a good credit rating.
It’s advisable not to just assume that your credit score is OK. If you had good credit five years ago it doesn’t necessarily mean you still do, so it’s a good idea to make sure you get a copy of your credit report to review and check your credit score.
3 – Closing my credit cards will improve my credit score.
It’s popular to think that having several credit cards has a negative effect on your credit score, and therefore closing them would improve it. However, one of the important factors of your credit score is your debt-to-credit ratio, and if you close too many cards at once it can significantly change your ratio which can then cause your credit score to drop.
4 – I don’t have to worry about my credit score because my spouse has a good credit score.
Credit reports only indicate an individual’s credit score, therefore your spouse’s good credit rating is not counted as yours. For example, if you take out a mortgage together, both of your credit scores will need to be checked. Furthermore, if you were to ever end your relationship, or if your spouse passes away, your credit score will become even more important.
5 – My income affects my credit score.
The amount of money you earn only affects your credit score if your income affects your capability to pay your bills. However, your income itself is not listed on your credit reports nor is it a factor in your credit score.
6 – Credit scores are locked in for 6 months.
Your credit score will change as soon as any information on your credit report changes. This could be on a weekly or even a daily basis, depending on when creditors update information to the credit bureaus. This is why it’s important to check your credit report often.
7 – I can never get a loan with a bad credit score.
There are a large number of companies that are willing to give loans to people with a poor credit score. However, the loans will most likely have higher interest rates and you may even be required to offer collateral. Make sure you are aware of loan amounts and repayment terms, like interest rates, as these can be are very high.
8 – How I run my bank accounts, investments and other personal finances impact on my credit score.
Anything relating to your bank accounts, investment accounts or cash transactions have no effect on your credit score. However, overdrafts can have an effect as that line of credit may show up on your reports. Any unpaid fees can also end up on your report if sent to a collections agency.
9 – Disputing an account will make it come off of my report.
Disputing an account with the credit bureau will result in them investigating your claim. If the bureau agrees that you are correct in your claim then the information will be removed. However, if they find the account or the information to be accurate, the information will remain on your credit report.
10 – I don’t need to worry about my credit report because I will not be applying for any new credit.
Lenders aren’t the only ones to check your credit score. Insurance companies, mobile phone companies and even potential employers may check it as well. And having a negative credit score can prevent you from getting a good insurance rate or a mobile phone contract.
Being financially responsible is crucial to maintaining a good credit rating. Therefore, keeping track of your credit report often and comparing it to your financial history will help you maintain a good credit score and good financial health.
You can get your FREE Credit Report For Life here