Credit Score Myths You Should Know About

Today having a good credit score is more valuable than ever before, especially in our current economy. For many of us trying to improve our credit has become a priority and can be quite the challenge, its even more difficult if we don’t have the correct information. With all the incorrect information floating around out there and all the different financial advise that is being handed to use it can get confusing to say the least. This article will help dispel some of those myths that probably have some of us going crazy and others of us just on the wrong track. Here are 8 credit score myths that you should know about:

  1. Closing Accounts Will Help Your Credit Score
  2. Opening An Account But Not Using The Account Will Raise Your Score
  3. Avoid Using Credit Cards All Together
  4. Dispute Letters Can Clean Up Your Bad Credit
  5. Using A Credit Counseling Service Lowers Your Score
  6. All credit Reports Are The Same
  7. Bad Credit Comes Off In Seven Years
  8. Credit Inquiries Hurt Your Score

Closing Accounts Will Help Your Credit Score
The myth about open accounts is that they are really available, potential debt so its better to close them. However, the financial gurus out there agree that most creditors want to see at least two or three pieces of active credit to prove you can manage debt responsibly. Once you start canceling accounts you are going to reduce your debt to credit ratio and possibly get rid of good credit history you have built.

Opening An Account But Not Using The Account Will Raise Your Score
The idea is that if you open accounts it will improve your utilization rate, and as a result some people open as many accounts as they can. The problem is that if you have a ton of different accounts out there they doesn’t look good either. Whats more important is that you are properly managing the accounts you do have. You want to build a positive credit history by paying your accounts on time. That is more important that have a variety of unused accounts out there.

Avoid Using Credit Cards All Together
The idea of having no debt whatsoever is a pleasant thought, but unfortunately one of the ways to show you are a worthy borrower is to borrow and make timely payments. In the world we live in you have to be able to prove you are financially responsible in order for lenders to take a chance on you and one way to do this is with credit cards. Many people pull our credit reports these days and being creditworthy can affect you in many ways even when it comes to your car insurance, landlords and cell phones.

Dispute Letters Can Clean Up Your bad Credit
If you find an error or errors on your credit report you should absolutely dispute them, but don’t expect that it will erase accurate negative credit. There is this idea that is floating around out there that if you dispute legitimate negative records on your credit report, at some point the lender won’t respond back on time and the credit bureau will be required to remove the item from your credit report. This is not entirely true, because the dispute letters may force the negative items to be removed temporarily, but if the lender can eventually prove the record is accurate then it will reappear on your credit report.

Using A Credit Counseling Service Lowers Your Score
The legend out there states that attending a credit counselor’s debt management program will be considered a negative in the credit scoring models. This is not true. The credit score system ignores any reference to credit counseling that may be in your credit file. The credit counseling does not by itself impact your credit score, however, it is obvious on the report that you’ve been through or are still in counseling. Individual lenders might not like to see this, but they also might not ever know.

All Credit Reports Are The Same
This is a big misconception and it is way wrong. Typically today, most creditors across the country do report their information to all three major agencies: Equifax, Experian and TransUnion. In the past that has not always been true. Also, because they are all three separate companies they might not update their records at the same time and with the same speed. Additionally, the agencies use inquiry activity to update your address, phone numbers, employment status and the like. It is common that creditors pull only one company’s report and its possible the one they pull might not be current.

Bad Credit Comes Off In Seven Years
This is partially true because some of it does. Chapter 13 bankrupcy disappears seven years from the filing date. However, if you filed Chapter 7 bankruptcy it comes off in 10 years from the filing date. The good thing is that accounts in bankruptcy can be deleted sever years after the date of the first missed payment. This means those accounts could disappear before the word “bankruptcy” is on your credit report. Your positive information will be around longer which is going to benefit you and your credit score.

Credit Inquiries Hurt Your Score
It is true that credit inquiries can have a negative impact on your credit score, but it is only a little ding on your score. Now if you combine this with a bad credit history this could factor negatively into your score more so than a good credit history. Inquiries alone have little impact on your score. The reason is because if you have bad credit and your applying for different credit cards this tends to not look good to lenders. Another myth is that pulling your own credit report lowers your score. This myth is not true and you should check your credit report on a regular basis so you can catch any possible errors and so you know what needs to be done to improve your score.