A lot of credit score myths about fico score
ratings get spread around and some of them are just outdated information.
Sometimes even lenders can give you the wrong advice and it can
get confusing. But the bottom line is bad information can cost
you money no matter who you get it from.
Fico score ratings are used for most mortgage lending,
which means, you need to know what will hurt or help your
credit score points. To make it clear, here are some of
the most common credit score myths:
Checking your credit report will hurt your credit score
Checking your own credit report and credit score counts as a
soft inquiry and does not go against your score. However, if anyone
else like a lender or credit card company is checking your credit
report, this is considered a hard inquiry and will generally knock
off about 5 credit score points.
The credit score rating system treats multiple inquiries in a
14-day period as just one inquiry. The system ignores all inquiries
made within 30 days prior to the day the credit score is computed.
So if you want to minimize the damage from credit inquiries, shop
for a loan in that short period of time.
Closing old accounts will improve your credit report score
Sometimes even lenders will tell you to close your old and inactive
accounts as a way for improving your credit report score. In most
cases, closing old accounts will actually have the opposite effect
with the current credit score rating system.
Canceling old credit accounts can actually lower your credit
score because it makes your credit history appear shorter. If
you want to reduce your levels of available credit, it's better
to reduce or close new accounts instead. Applying for new credit
is more likely to lower your score.
You need to check more than just FICO score rating
If you ever hear this from anyone, consider it a red flag.
All of the three major credit reporting bureaus offer FICO
credit score ratings using the formula developed by Fair,
Isaac. Even though each one gives the scores a different
name you only need a fico score rating from the three major
credit reporting bureaus.
At Equifax, the FICO score rating is called the Beacon credit
score. At TransUnion, it’s called Empirica. At Experian,
it's known as the Experian/Fair, Isaac Risk Model.
The reason each of the three major credit reporting bureaus will
have three different scores is because they don’t all share
the same data. So when checking your credit report, just make
sure it comes from the three major credit reporting bureaus: Experian,
TransUnion and Equifax.
Examine your credit reports from all three major credit reporting
bureaus before you apply for a big loan like a mortgage. Fix any
errors in all three reports before you shop for a loan because
it takes time to correct your credit report.
Credit counseling will hurt your score
The current FICO credit score rating system ignores any reference
to credit counseling that may be in your file. The researchers
at Fair, Isaac, the company that created the FICO credit scoring
rating system, found that people getting credit counseling didn’t
default on their debts any more often than anyone else.
However, any late payments you've had with creditors will hurt
your credit score. Credit counseling can hurt your ability to
get a loan because you probably have had trouble paying creditors.
Some lenders will back away if you are in credit counseling.
Others may see it differently, but usually will charge you higher
interest rates than if you had perfect credit.
The best way to improve your credit report score is paying your
bills on time and paying down credit card debt. Check your credit
report regularly for any errors and make sure you don't fall for
these common credit score myths.
Web site and all contents © Copyright Credit-Cards.us
2007-2008, All rights reserved.