The basic details of what can raise or lower your credit score are obvious. Pay our bills on time and your credit score will go up. Skip payments or pay your bills late and your credit score will go down. Everyone knows this much.
The problem comes in when people believe that they know about what will raise or lower their credit scores but the information that they have is incorrect. Following are some credit score myths that you need to know about.
The Myth About Closing Older Accounts
Many people believe that if they close off older, paid off accounts then their credit score will increase. This is not the case. Older accounts that you have made timely payments to reflect well on your credit score. Closing the account may be the action that proves detrimental to your credit.
If, for example, you close an old credit card account then you will lose out on having that part of your good credit history. You will also lose the credit limit on that account which contributes to your total available credit limit. Your credit score is better when the balance on your accounts is significantly lower than your overall credit limit.
Closing an old account will decrease your overall credit limit and will adversely impact your credit score. The lesson to learn from this is to keep old accounts open when you have been conscientious in paying them off. They help your overall credit rating.
The Myth About Seeking A Loan
Many people believe that if they are shopping for a loan and have multiple companies running credit checks on them then their credit score will go down. Actually, you can have numerous credit checks on your account, provided they are all geared toward the same kind of loan, within a 14 day period without these checks impacting your credit score. It is not seeking out a loan that hurts your credit. If you decide to spread out your loan shopping attempts over a period that is longer than 14 days that is when your credit could suffer.
The credit scoring system is not set up to penalize you for taking the time to try to get the best deal on a loan. That is why this grace period is present in the system. You should be able to shop around to get the best possible loan that you can without suffering any negative consequences.
The Myth About The Person Who Pays All Their Bills On Time
Some people feel that if they pay all their bills on time then they never have to check their credit. After all, without any actions that could lower their credit scores, why would they need to check it? They believe that a person who is financially responsible and who handles all financial affairs in the appropriate timely fashion does not have to request their credit report for review.
This is a big myth. Credit reports do reflect financial mishaps and if you do not have any then that is wonderful. Still, credit reports can have mistakes. These errors could be present and could be blemishes on your record that should not be there. You cannot remove them if you don’t know they exist.
These credit myths are widely believed. But they are myths. Knowing the truth will help you to protect your credit score and not be fooled by these widespread myths.
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