Your credit score and myths associated with it
Your credit score is related to the credit information present on your report. As the information on your credit report changes, your score will change too. Now, whether the change is for good or bad is up to you to take care of. How responsible you are financially, will decide whether you will have a good or a bad score, whether you will or will not be considered for future loans, mortgages and credit cards.
What are the myths associated with credit scores?
There are various myths associated with credit scores. Every one of you want to improve your scores and some may even go to the extent of believing everything that is said. That is not the right approach. There are specific things you may do to improve credit scores and there are others that would not help at all.
Remember, there is no magic to work up your credit scores. You can only improve credit scores by being regular on your payments and not defaulting on them and by handling your credit well.
Here is a list of myths people believe about factors that work on improving their scores:
1. Your score will fall if you pull your report – This is not true. If you pull your own report, it is considered as a ‘soft inquiry’ and is not harmful for your score at all. Your score can come down only by a ‘hard inquiry’ made by creditors or any other lenders. You must also remember that multiple inquiries within a limited time period, for the same reason, will also be grouped together and may only slightly affect your score. It is necessary that you take a look at your report to find out if there is any discrepancy that you need to get removed because false information will definitely harm your score.
2. Negative accounts are removed once paid – Negative accounts reflect as ‘paid’ once paid off but will be removed only after the specified time is over. For example, a charge-off will remain on your report for 7 years and bankruptcies for 7-10 years respectively. Once the account is paid, it will definitely boost your score to some extent but maybe not remarkably.
3. You are not responsible for an account as a co-signor – On the contrary, when you co-sign an account or become an authorized user on someone’s credit card, you become legally responsible for the account. Any activity on such accounts will reflect on both party’s report and score respectively. For example, if you have co-signed on a family member’s mortgage, and the family member defaults on the loan, your score will also be affected and vice versa. You must be removed as a co-signor or must get the loan refinanced to avoid such a situation.
4. Closing old unused accounts will improve score – An old account means a long credit history and closing one of such accounts would only mean shortening your credit history. This does not have a good impact on our score. Ask your credit card company to lower the limit on your card and close newer cards instead.
5. Opening many new accounts will improve score – If you already have several accounts and look forward to improving your score, do not get new accounts. This will only hamper your score. If you have never had an account, then opening new accounts (not too many) will boost your score.
6. Paying off a debt increases at least 50 points – The calculations for your credit score is based on a complex algorithm. Hence, it is very difficult to assess how many points would increase by taking care of one factor. Paying off a debt nevertheless, does improve your score. So, pay off any debt that you have.
Remember, there is no magic to work up your credit scores. You can only improve credit scores by being regular on your payments and not defaulting on them and by handling your credit well.
Author: Justin is associated with the Creditmagic Community making regular contributions as a member of the community. Not only has be made notable contributions to the community, he has also written articles for different financial websites.
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