The financial crisis has highlighted the need to maintain a good credit score and also what factors have the most impact on the score. Since there are a variety of information on the credit, you should know that the information you get is brought experts who are well educated and informed about the functioning of credit rating. Very often, misinformation circulating as urban legends about anything else. What is particularly alarming is that much of this information is coming from people in the mortgage and real estate industry who hear subconsciously hear bad information and spread rumors. For this reason, it is important to be aware of the most common credit score myths that can actually hurt your credit score instead of improving it. Many of these false tips may actually seem they make sense, but can actually hurt your credit score more than they will help.
After working in the mortgage industry and real estate for nearly two decades, I know first hand and experience in the credit processing. I have had many clients who unfortunately chose to listen to others who are not crediting experts, and the result is often an interest rate much higher, or are on their loan.
Probably the most common term is incorrect that the closure of long-established accounts will improve your credit score. This may seem logical, given that the lack of open credit may indicate a lack of ability to carry high amounts of debt. In fact, the length of time that the accounts have been established in fact an important part of the credit, so that the closure of these can have a negative impact. People who work for years to pay off often close the account credit card as a way to have closure in both their lives when they were overloaded with too much debt. This should be avoided if possible. A good alternative would be to ask the creditor to reduce the credit line if you feel uncomfortable to have a credit card with a high credit limit. It would be a much better alternative to closing the account entirely in order to keep your credit score high.
Another myth is that checking your credit will lower your credit score. This is not true, as long as you check your credit if a service was aimed at consumers. In other words, if you have a friend who works for a company that has access to credit reports pull your credit score, it will make a survey that will affect the score. But what about other types of inquiries? Many consumers have an unfounded fear of letting several companies check their credit when they shop for a mortgage or vehicle. While investigations lightly touch the score, credit bureaus expect people to shop for mortgages and auto loans.
Therefore, all requests for one of these companies represent a full investigation as long as they are within 30 days. Credit bureaus are not in the business of keeping consumers to shop around for the best deal, so they allow several inquiries of these entities. Now if you happen to ask for more credit cards in a short period, it will count as many inquiries that can seriously damage your score. Many credit card applications are seen as a desperate move possible by a consumer to obtain credit for living expenses because they can not afford otherwise. This means a higher credit risk.
Although many credit myths exist, these are the two most common. Always check with a professional who is well educated in how credit scores work before making assumptions that could cause you to get a higher rate, or to be denied a loan completely.