There are plenty of misconceptions out there about credit scores. Many of which can severely damage yours, if you’re not careful. We have compiled 5 myths about credit scores so you don’t fall victim and end up with a negatively impacted score.
5 Myths About Credit Scores To Watch Out For
1. Closing a credit account will help my score
You might think that closing a credit account shows responsibility. What’s actually happening, though, is you are decreasing your overall credit limit. When you spend money you end up closer to your spending limit, which does not look great to lenders or the credit bureaus. If you really want to close an account, remove a newer one. Thirty-five percent of your FICO credit score is based your credit history, including the average length of credit history across all of your accounts. Removing an old account decreases the average length of your credit history, which is why you should eliminate newer ones first.
2. When you pay off a negative record, it’s taken off your report
If only you could get rid of a negative record that easily. Unfortunately, things such as collection accounts and late payments remain on your report for seven years from the date they were first delinquent. In the end, when you pay off the account, it only shows up as “paid.”
3. All three credit scores are the same
There are three major credit bureaus: Experian, Equifax and TransUnion. Each of these bureaus will give you a different credit report that will have a different score. Not all information is sent to all three and they don’t share information with each other, which is why they often show different scores. This is why it’s a good idea to take advantage of the free credit check you get once a year from each of the major bureaus so you can make sure there are no errors in any of the reports.
4. Not having a credit card means you’ll have good credit
It’s actually quite the contrary. Having credit cards and being able to manage them plays a big role in calculating your score. Having these accounts helps you build credit history as well, which is something else you need to help boost your credit score. Creditors and lenders like seeing that you have and can manage credit cards. When you don’t have any, they will likely see you as a higher risk than those who do have credit cards.
5. Co-signing has no risks
Perhaps a child or a family member has asked you to co-sign for them on something because they don’t have enough (or have very poor) credit history. You offer to help them because you don’t have anything to worry about, right? Not true. If they fail to make their payments on time, your credit is going to take the hit along with theirs. Once your name is on the loan, you take on all the risks that come with it. Even if it’s someone you know and love, be cautious when co-signing if you have good credit.
Do you have anymore myths about credit scores you’d like to add? To enlist the help of a trustworthy, effective credit repair company, call us today at 1-866-991-4885!
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