The following is a guest post by Tisha Tolar.
The term “credit score” has been thrown around almost daily these days. People are worried about the changes in the credit card industry and realize no more than ever the importance of their credit score on their financial well-being. Credit cards used to be a bit easier to obtain. Because of that, many people with less than stellar records of responsibility when it comes to handling finances were able to obtain several credit cards and proceed to run them to the max limits; thereby ruining their credit. Now, with the unstable economy and concern over the credit crunch, more people are taking a good, long look at their credit reports and working hard to make necessary repairs.
But what about the things we’ve all heard about credit scores? How do we know what is fact and what is fiction when it comes to repairing their credit scores? Well, here are 5 things that are myths about your credit score to give you a head start.
1. You Only Have One Credit Score
Ever hear of Experian, Trans Union, and Equifax? Well, those are the names of the three major credit reporting agencies – all calculate their own version of your credit score. Not all of the bureaus will always receive the same information about your credit history and will therefore differ. While the scoring models each agency uses is different, for all intents and purpose, the scores will all be relevant to each other.
2. Your Income Affects Your Credit Score
Nope – not true. It does not matter how much you make, it will not have a direct impact on your credit score. The only way your income has an effect on your credit is when you don’t have enough money coming in to pay your bills on time.
3. You Should Close Accounts
Because your credit worthiness depends up on your credit limits versus your debt, it can be disadvantageous to close your accounts, even if you are not using them. This is not to say that you need to open a ton of new accounts to improve your score. Basically, make the most of what you have to work with. You want to appear consistent and steady and risk free to lenders.
4. Don’t Check Your Own Credit
This is a big no-no. You should ALWAYS check your credit score. First of all you want to be sure the information being reported to all three of the agency is correct and the most accurate of information is contained in your report. Second, if you don’t check your own credit you won’t even know where you stand financially. You can check your credit as often as you want and it will not negatively affect your credit score.
5. Comparing Loans Will Haunt You
If you are looking to get a mortgage and apply at several different places within a two week time period, this will not affect your credit adversely. Lenders will be able to reason that you are shopping wisely for the best loan rates. However, if you apply at different places for different types of loans, this may indicate you are desperate for money from any source and will be bad for your score.
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Tisha Tolar is a freelance writer providing content for CreditCardAssist.com, where she regularly writes about credit cards, rewards programs and general consumer finance issues.
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