Credit Report Myths Debunked

There are a lot of misconceptions surrounding credit reports and things you can do to help raise your credit score. As a result, some people make unnecessary mistakes when they’re trying to improve their standing. This is an unfortunate fact that can easily be avoided. Below are 4 common myths that can destroy your record instead of improving it.

1.    Credit Counseling Can Damage My Score

Going to a credit counselor isn’t such a bad idea if you’re in deep trouble. In addition, credit rating agencies don’t want to discourage people from seeking help when they need it. According to Craig Watts from the Fair Isaac Corp, “We don’t want consumers to consider credit counseling to be detrimental to their FICO scores.”

It is important to note the difference between someone counseling you about credit, and someone who is trying to push you into a debt settlement or debt relief program.  These programs can and will seriously lower and damage your score.  Be sure to seek out proper guidance if you are looking into advice about credit counseling.

2.    Cancelling Credit Card Accounts

Some people think that cancelling their credit card is a good idea because it improves their credit scores. But this is more myth than fact. Financial experts reveal that creditors prefer to see borrowers with two or three credit cards because this is proof that they are responsible. It also gives the impression that just because you have $20,000 in credit line doesn’t mean you’re going to spend it unwisely.

It is more beneficial to keep your oldest credit cards active as they show length of established credit history. Length of credit history does play a role in how your score is determined. You can get a free credit report card to see exactly how your history length is tied to your score.

3.    Paying Off Debt Will Instantly Make My Credit Report Perfect

The credit report is a compilation of your financial history. If you don’t pay your bills on time or drag your heels in repaying creditors, it is not right to expect that everything will suddenly become right just because you paid your balance down to zero. The credit report is only a snapshot of your current situation; it also takes into account detailed data about your past credit behavior.

4.    Inquiries Will Damage My Score

This might have been true at one time but credit reporting agencies are quick to adapt. They can recognize a savvy buyer based on his record. For example, say you are trying to find the right deal by negotiating with 5 car loan companies.  Most likely they will all ask to do their own credit report inquiry to ensure they can get you the best deal. If these inquire were all done in the same 30 day window then it will not affect your credit score. 

There is also the flip side to this.  If you continue to have your credit pulled by loan companies after a 30 day period then you can pretty much guarantee your score will drop. The bureaus will this will take into account these pulls and figure that you are completely unable to qualify for financing.