In the credit orbit, if you believe tales that sound plausible but are definitely untrue, you can harm your credit. Quite often people learn about credit and other personal financial matters from friends, coworkers and family members. Many people are hurt from negative credit reports because they believe many of the credit misleading falsehoods shared by friends and coworkers.
The following are some frequently shared credit misleading falsehoods.
01. All lenders use only one credit score: Untrue. The credit bureaus (Experian, Equifax and TransUnion), all report their own scores using the same software from Fair Isaac Corporation with same secret formula. Lenders do not necessarily use the same credit bureau’s scores.
02. You can increase your credit score by paying in cash: Untrue. Your credit score and report will be affected only by using credit accounts.
03. Poor credit can stop you from being hired: Untrue. Several jobs consider people that have shown responsible use of credit. Prospective and current employers have to get your written permission to request a credit report. The employer will only receive a modified, paper copy of the report without credit score.
04. You will lower your credit score by checking your credit report: Untrue. Though too many frequent or ‘hard’ credit inquiries within two year(as an example) will harshly impact your credit score.Lenders carry out hard credit check before they offer you a loan or credit card. It indicates to everyone out there that you about to get more credit. When you check your own credit report it’s called ‘soft’ inquiry. This should not impact your credit score. It is recommended that you check your credit report as often as you can because it will not affect it negatively.
05. The most appropriate way to increase your credit score is to pay off and then close your credit accounts: Untrue. This misleading falsehood in the Credit orbit appears plausible because it encourages you to pay off your balance which is impressive for your credit score. The headache with closing paid off accounts is that it lowers your total available credit and may reduce your credit score. In addition, closed accounts that are paid off are good, but open accounts that are paid off are even excellent for credit score.
06. If you have earned a college degree, it will affect your credit score: Untrue. Federal law makes it illegal and forbids credit bureaus from using education, age, gender, race, marital status, national origin, sexual orientation or religion to determine credit score.
07. You will improve your credit score by opening several credit accounts: Untrue. Opening one or two can help but opening several accounts will make creditors think you stand the chance to owe too much.
08. When you make more money, your credit score is positively affected: Untrue. Income, bank account balances, investment accounts or any other sources of wealth are not listed in your credit report. The main thing that matters on a credit report is your credit usage, how responsibly you pay credit accounts, the length of your credit history, and mix of your types of credit accounts.
09. All delinquencies are the same: Untrue. If you miss mortgage or car payments, they will adversely impact more than a missed credit card payment. The fairly large debt counts a lot more. Avoid skipping the car or house payment, if you have to be late with a payment.
10. You can help increase your credit score by opting out of credit offers: Untrue. Unsolicited credit offers you receive in the mail or email are based on “soft” inquiries to your credit that you did not ask for. These soft inquiries don’t count against you and won’t impact your credit score.
11. Pay off a loan early is better than making payments: Untrue. Closed paid off accounts help your credit score, but open accounts in good standing are better. Open accounts show your current credit worthiness and are more of an indication of how you will pay in the future.
12. If you have any negative items on your credit report, you can’t have a good credit score: Untrue. More recent information on your report counts more than older data. If you missed a few payments four years ago, but have made all payments since then, you can still have a very respectable score. Every step you take today in rebuilding your credit helps.
13. You can get rid of hard inquiries on your credit report: Untrue. Some people think if you load up on “soft” inquiries that don’t count, eventually hard inquiries will drop off your report. There is no evidence to suggest that there is a limit to the number of inquiries that will be listed on your credit report.
14. You can increase your credit score by paying before the due date: Untrue. It’s a very good idea to pay on time, but paying a few days early has no effect at all. If you pay your statement balance before the statement closing date, in any case, the creditor will report a“$0” balance which help your credit score.
When you believe a narrative that is untrue, like these misleading falsehoods, you could destroy your credit. Do not, by any stretch of imagination, believe them.