Top 5 Credit Myths Debunked, Forever

Myth #1: Checking your credit negatively affects it.

It NEVER lowers your score to check your own credit. Self-checks are “soft inquiries” that have no effect on your credit. Credit checks of other kinds are likewise safe. A soft inquiry is what happens when you get a pre-screened credit card offer in the mail. When a potential employer runs a mild inquiry on your credit.

Myth number two: Credit reports and scores are interchangeable.

Your credit accounts are listed on your credit report. Experian, Transunion, and Equifax are the three primary consumer credit reporting agencies, but they are not the only ones that have a file on you. The reports look slightly different, but they all contain the same information: your name, address, and any collection accounts you may have; a list of your credit accounts; any liens or other public records; and any credit inquiries.

Based on a sophisticated algorithm that analyzes your use of credit over time, your credit score is a three-digit figure that indicates how likely you are to pay back your obligations.

Your credit report does not contain your credit score.

Myth #3: The best credit score is one with no credit cards.

The credit scoring companies lack a basis for determining your credit score if you don’t use credit.

For those with little experience using credit goods, some alternative credit scores are calculated. These ratings look at a customer’s past behavior with regard to utility bills, cell phone bills, rent payments, and other debts.

But consumers who have used and had credit goods are the only ones who can get a top score. A cash-only way of living is excellent for the bank account but not for your credit rating.

Myth #4: Not all past-due accounts are listed on a credit report.

Unfortunately, even when you pay your payments on time each month, some of them don’t help you establish credit. Typically included in that category are things like cell phones, utilities, rent, and medical expenses. But if you let that account become past due, it’s a different situation.

If your account is turned over to a collection agency, you can expect that it will appear on your credit report even if the original creditor doesn’t immediately report your late account. One tactic they use to get you to pay up is the threat of bad credit.

Myth #5: A credit report is instantly cleaned up after paying off debt.

While paying off debt and attending to outstanding payments is a wise move, you shouldn’t think that doing so would instantly improve your credit score. Your credit report lists both good and bad accounts, such as collections, discharges, missed payments, and bankruptcies, some of which can stay on your record for up to 10 years.

Nevertheless, some collection companies explicitly state in their advertisements that they would stop reporting a collection account once it has been settled. An account won’t appear on your credit report if the account holder doesn’t report it.

Watch your credit report if it needs cleaning up, and even if it’s currently in excellent condition. You are responsible for ensuring that your information is accurately and error-freely reflected in your credit report.

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