A Good Credit Score

A Good Credit Score

C.R.U.L. Intentions: Credit Report Urban Legends

The whole idea of credit can seem like it’s shrouded in mystery, so it’s no wonder that there are many myths — or “urban legends” — about credit. How do you separate the fact from the fiction? Well, these are some of the most common credit myths, and what the truth really is.

Inquiry Legends

You might have heard that applying for credit too often can hurt your credit score. Each time that you apply for credit, whether you’re approved or not, an inquiry goes on your credit report. Rack up too many inquiries and your credit score will plummet. However, you don’t need to be too afraid of inquiries. First of all, multiple inquiries for the same purpose, such as shopping around for the best deal on a home loan, only count as one total inquiry. Secondly, it doesn’t hurt you to check your own credit report — only applications for credit count against you. Lastly, inquiries of any kind only stay on your credit report for six months. So, be aware of how inquiries affect your credit and you’ll keep your score high.

Regarding inquiries, you should also be aware that you do not need to give your permission for your credit reports to be checked. Regardless of what you’ve heard, a potential creditor, an insurance company, a landlord, or virtually anyone else can check your credit report without your permission. There is an exception to this rule, though. Your employer must ask before checking your credit history, even if you’ve already given them your social security number.

Credit Repair Legends

One of the most popular credit repair myths is that if you pay off your debts, you’ll instantly improve your credit score. While it’s true that a paid debt is better than an unpaid debt, any missed payments or past delinquencies are still ugly marks on your credit report. The good news is that all those late payments and delinquencies are removed from your credit report after seven years, so you won’t be saddled with bad credit forever.

Based on that information, another credit myth that people perpetrate is that your credit will be cleared of all problems after seven years. Chapter 7 bankruptcy stays on your record for ten years, and unpaid judgments can remain on your credit report forever. Seven isn’t necessarily a magic number when it comes to your credit report.

You may have also heard that when you’re trying to repair your credit score, you should close all of your credit cards. This is definitely a myth! Open credit cards with available credit help your credit score. If you close your accounts, you could have trouble opening new ones in the future. It’s much more helpful to pay down your credit cards and leave them active.

Credit Counseling Myths

If you’re working on repairing your credit, you may have wondered about those credit counselors and debt management services. They often get a bad name, but is it deserved? Sometimes. For example, it’s a myth that you can pay a company to fix your credit. A hands-off approach is usually trouble. Instead, you should look for a company that works with you one-on-one to help you reduce your debts and maintain or improve your credit score at the same time. Good luck improving your credit, and watch out for bad information!

Category: credit Tags: