We have all heard the rumors…from neighbors, relatives or friends.
There are a wide variety of myths floating around about what you should
and shouldn't do to improve your
credit scores. The buck stops here!
We have attempted to exposed some of these urban legends to provide you
with the truth about credit:
- Your score will drop if you check your credit
- Fortunately,
this one is definitely not true.Checking
your own report and score is counted as a "soft inquiry" and
doesn't harm your credit at all. Only "hard inquiries" from a lender
or creditor, made when you apply for credit, can bring your credit
score down a few points. Worried about damaging your credit while
shopping around for a loan? Multiple inquiries for the same purpose
within a short amount of time (a few weeks) are grouped together into
a less damaging period of inquiry.
- Closing old accounts will improve your credit score
- To close
or not to close, that is the question. Many people advocate closing
old and inactive accounts as a way for improving your credit. In most
cases, closing accounts will actually have the opposite effect.
Canceling old credit accounts can lower yourcredit
score by making your credit history appear shorter. Think twice
before closing the oldest account on your credit report. If you want
to reduce your levels of available credit, ask for your credit limits
to be reduced or close newer accounts instead.
- Once you pay off a negative record, it is removed from your credit
report
- Negative records such as collection accounts, bankruptcies
and charge-offs will remain on your credit report for 7-10 years after
they are first posted. Paying off the account before the end of the
set term doesn't remove it from your credit report, but will cause the
account to be marked as "paid." It is still a good idea to pay your
debts, it can improve yourcredit
score, but the major improvement will come when the record
expires.
- Being a co-signer doesn't make you responsible for the account
-
When you open a joint account, co-sign on a loan or become an
authorized user on someone's credit card, you are taking on legal
responsibility for the account. Any activity on these shared accounts,
good or bad, will show up on both people's credit reports. If you
co-sign for a friend's auto loan and they don't make the payments,
your credit profile will be hurt by their actions and visa versa. The
only way to stop this double reporting is to refinance the loan or to
have the creditor officially remove you from the account.
- Paying off a debt will add 50 points to your credit score
-
Yourcredit
score is calculated using a complex algorithm that takes into
account hundreds of factors and values. It is very hard to predict how
many points you can gain by changing one factor. For a person with a
high
credit score, just one late payment can cause a significant drop. If a
person has a low credit score, it may not cause a large drop at all.
There is no magical way to improve your credit score, just keep paying
your bills on time, reducing your debts and removing negative
inaccuracies from your
credit report. Good financial behavior and time are the two most
important factors on your credit score.
Get your credit report and score NOW!
