The ONE BIG LIE Credit Companies Want You To Believe...and other Credit Myths
It’s no secret that credit reports are confusing and difficult to read. Perhaps universities should offer classes like, How To Interpret My Credit Report. Even if you’re familiar with the ins and outs of credit reporting, the “Big Three” bureaus – Equifax, Experian, and Trans Union – make it particularly challenging because they all analyze, collect, and report credit data differently; which explains why there are often huge discrepancies in our scores.
How is Credit Scored?
There is a ton of misinformation floating around out there about how credit is scored - FICO, Beacon, Fair Isaac, etc. Let's take a few moments and debunk a couple of those myths about what does and does not affect credit scores.
- Small debts (like outstanding utility and medical bills) don’t count against me, and eventually fall off. WRONG! If left unpaid, those bills will eventually get sent to a collection agency who WILL report them to the credit bureaus. And while old debts may be removed after seven years, the reporting agencies are NOT required by law to remove them automatically, and often, they don’t.
- I don’t need to check my credit score because I pay my bills on time. Plus, checking my report counts against me. WRONG! It’s up to you to be pro-active against inaccurate reporting, fraud, and identity theft. When you, or a potential employer, or landlord pull your report for limited information only – not for the purpose of extending credit – it’s called a “soft pull” or “soft check” and it does not hurt your score. So stay on top of your personal information.
And the NUMBER 1 LIE Creditors Want You to Believe…..
- I should keep old credit lines open because closing them will reduce my credit history. WRONG! Of course your creditors don’t want you to close those available lines of credit….they want you to keep using them! But don’t hesitate to close accounts you’ve paid off and are not using. Actually, having too much “available credit” is also viewed as a negative, so closing those old lines will not hurt your credit. Just make sure you don’t leave yourself maxed out on your other open lines of credit as this will affect your credit use ratio.
If you want to get pre-qualified to purchase a house and have questions about your credit report, contact us today! Any of our expert Buyer Specialists at Mike Mazyck Realty will be happy to assist you.