Debunking The Rumors: Ten Myths About Credit

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Don’t believe everything you read

There is a lot of information about credit scores available out there – some of it’s true and some of it is not true. How do you know what to believe? Here are some of the myths that circulate just about all the time.

1. Every time you apply for credit, you lose 5 points off your credit score. This is so not true. There isn’t a fixed number of points that will be taken off your score when you apply for credit, and what is shaved off is minute.

2. Your credit score is determined by where you live. Your place of residence isn’t even a factor when it comes to calculating your credit score.

3. A bankruptcy will stay on your credit report forever. The truth of the matter is that a bankruptcy can be listed for up to 10 years. But it can still devastate your credit score, so if you are considering this option, think it over very carefully.

4. If you make more money, your credit score will be higher. No matter what your income, you won’t find it listed on your credit report, so it won’t affect your credit score. Your income isn’t factored into your credit score at all.

5. If you go to a credit counselor, your credit score drops. Going to a credit counselor will have no affect on your credit score, but negotiated settlements will.

6. It’s better to have smaller balances on several credit cards than to have a large balance on one card. This is necessarily true. You could lose points for having more accounts with balances. Credit scores factor in the number of accounts you have or the credit cards you have that carry a balance, as well as how you use credit overall.

7. Paying my debt off will make my credit report instantly clean. Not so. Your report is your payment history – and you can’t change the past.

8. If I cancel my credit card, my score will automatically go up. This isn’t necessarily true. You need some debt, in order to show lenders that you can effectively manage it.

9. There’s no difference between the credit reports at the three reporting bureaus. Each bureau has its own method of reporting, and works on its own timetable. This means there are variances. This is important to remember, and makes it vital that you check your report from all three bureaus once a year.

10. I don’t need to check my credit report, as long as I pay my bills on time. This comment deserves a resounding, “No!” No matter how spotless your credit report or how high your credit score, or even if you’ve never been late even one day paying a bill, it’s still important to review your credit report once a year. You want to be sure the information is correct, in addition to making sure your identity hasn’t been stolen. All too often, by the time consumers figure out that their identity has been stolen, a thief has already done serious damage.

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