Myths about your Credit Report Score:
There are a large number of myths surrounding your Credit Report Score. We list them, and other facts surrounding your Credit Report Score below.
Find your Free Credit Report Score here.
Paying off all debts increases your Credit Report Score immediately:
Since your Credit Report Score is based on a history not an instant snapshot, paying off all your debts will help, but only over time. Paying everything off will help to increase your Credit Report Score over time. Nothing can increase it immediately.
You must give permission for a company to see your Credit Report Score:
Any company can check your Credit Report Score at any time. The only time that a company needs your signature to check your Credit Report Score is when you are seeking employment.
Credit Counseling will ruin my Credit Report Score:
The Fair, Issac and Co. (FICO) company, that creates the scoring models for your Credit Report Score does not consider Credit Counseling to be nearly as negative as bankruptcy on your Credit Report Score. FICO wants people to consider credit counseling over bankruptcy. It is important to note however, that when the credit counselor negotiates a contract whereby you pay less, the lender decides how this is reported. Thus, the lender may report the re-negotiated amount as a good or bad mark on your Credit Report Score.
By entering into Credit Counseling you do not change your Credit Report Score by much, the fact that you have entered counseling is actually marked on your report. Some companies examining your Credit Report Score will not like this and refuse to lend to you, others will charge higher rates, and still others will see this as a positive, and give you the loan.
Most car dealers will take advantage of the Credit Counseling mark on your Credit Report Score to charge you higher rates, however GMAC will treat this as a positive if you have been seeing a Credit Counselor for eight months. They see that you are trying to change your Credit Report Score as a positive.
Find your Free Credit Report Score here.
Cancelling my Credit Cards boosts my Credit Report Score:
Conventional wisdom says that an open account shows available reserves that could be turned into debt. Therefore, the common convention is that you should get rid of these accounts, and close them off. However, most creditors want to see at least two or three forms of active credit on your Credit Report and see that you have been managing them well.
Also, if you have some unused credit cards or department store cards, this does not weaken your Credit Report Score. The myth is that Creditors will look at them badly. The truth is that paying your bills on time, and not overextending your credit is much more important than having $5000 available on an unused credit card. In fact, how you pay your bills is 35% of your total Credit Report Score.
The flipside of this is that having a large number of charge accounts can hurt your Credit Report Score. If you sign up for a single account, the effect is hardly noticed on your Score, however, if you sign up for 12 cards at one time - say, over Christmas - this will likely lower your score.
Too many checks damage my Credit Report Score:
This statement used to be true. Formerly, each credit check caused your Credit Report Score to drop a couple of points. However, the Credit Report agencies recognize that people now shop around for a Mortgage or Car Loan. If the Credit Report Agency sees a large number of Mortgage inquires all appear within the time span of a month, this does not hurt your Credit Report Score. The reason is they can tell you are looking for the best deal on a Mortgage.
So, if the Credit Report Agencies see that you in the period over 6 months that during 1 month you aggressivly queried for Car Loans or Mortgages during that time, they assume that you were just shopping for the best deal. Therefore, aquiring the best deal (quickly mind you!) does not reflect on your Credit Report Score.
Find your Free Credit Report Score here.
Checking your own Credit Report Score reduces your score:
In reality, your Credit Report Score is checked in one of two ways. Hard Pulls, and Soft Pulls as the industry calls them. A Hard Pull is when a creditor pulls your Credit Report Score to decide if they should issue you credit. A Soft Pull occurs when you check your own credit. A Soft Pull does not appear on your Credit Report - and thus it does not affect the Score.
You have the choice of passivly checking your Credit Report Score once a year, or, if you wish, be more aggressive and check it every month. However, remember your Credit Report Score usually does not go upward quickly.
Your Credit Report Scores are locked in for six months:
Your Credit Report Score is a dynamic number, it changes. The FICO company recalculates your Credit Report Score each time someone other than yourself checks it.
I pay my bills on time, so I don't need to check my Credit Report Score:
It was discovered in 2002 that 78% of American Credit Reports were missing a revolving credit account that was in good standing. Furthermore, 33% of files lacked a Mortgage account that had never been late! 29% contained conficting information on how many times the customer had been over 60 days late on payments.
In reality, your Credit Report Score can have a large amount of activity on it that you are unaware of. Overall, 80% of credit reports have some type of error on them, everything from incorrect birth date, address errors, and accounts you never applied for. It is your responsibility to check your Credit Report Score for these errors and repair them.
Find your Free Credit Report Score here.
All Credit Report Scores are the Same:
Not true. There are three major companies that handle your Credit Report Score. TransUnion, Equifax and Experian. Since each one is a separate company, how often they update their records - or how often they recieve credit information - varies. Since creditors only use one of the compainies to perform their lookup, they often have missing or erroneus information.
It is very rare for all three compaines to all have the same records on your Credit Report.
Divorces remove your partner from your Credit Report Score:
While you might be legally divided, even if the court order is to divide the credit card, house, car etc, however, this does not affect the Credit Report Agencies at all. Many people are outraged to find out after a few years that their ex-spouses activities are still attached to their Credit Report Score. The worst part of this is that by the time you discover this, it is too late to repair this mark on your Credit Report Score.
When you enter into divorce, you must contact the creditors and close the current accounts, or have your ex sign a letter of consent for this action.
All bad news on your Credit Report Score is removed in 7 years:
Some of the bad marks do come off after 7 years. If you file for chapter 13 (a reorganization of your debt) this dissapears after 7 years. However, if you filed for chapter 7 bankruptcy (all debt absolved) then it takes 10 years for this to be removed from your Credit Report Score.
Accounts that you have that have been in bankruptcy for seven years since your first missed payment do come off your Credit Report Score. This means that the word Bankruptcy dissapears off your report. Likewise, if you close an account that has no problems, it dissapears off your Credit Report after 10 years instead of seven. This means that the good news stays around longer than the bad.
However, as mentioned above, how you pay your bills is a full 35% of your Credit Report Score. The creditor who had the unpaid bills has the right to place the billing issue on your credit report up to 3 times. This is a total of 21 years! Whenever you pay up, even if it is at year 21, the record gains new life for another seven years. For this reason, you should insist on having the words "satisfied in full" added to these bills on your Credit Report Score.
I can just pay someone to fix my Credit Report Score:
Anytime you hear this, someone is likely uninformed - or lying. You can fix up information on your Credit Report Score that is innacuate, however, you cannot "fix" legitimate marks on your Credit Report Score. Any company that claims that they can fix your credit by sending a large amount of letters to dispute these marks to your Credit Report Score is misleading you. While that information will be removed - for 30 days - if the information cannot be proved to be correct, then the mark reappears on your Credit Report Score.