Debunking 10 Credit Score Myths!

DHREA 01/10/2018

 

Your credit score is one of your most powerful tools for planning your financial future –mostly because it determines the terms of loans like mortgages. Unfortunately, there’s a lot of misunderstandings about FICO scores, and it can lead you to miss out on the benefits of your credit.

Myth #1 Checking Your Credit Lowers Your Score

There’s a difference between you checking your credit and a creditor checking your credit. When you apply for credit, the creditor conducts “a hard inquiry” to review your rating. Only hard inquiries affect your score. Inquiries stay on your report for 24 months, but only the ones from the past 12 months affect your score.

The good news is that one or two inquiries a year are nothing to worry about. But have been applying for credit or loans more than three times a year, it may start lowering your score.

Myth #2 Your Debt-to-Income Ratio Affects Your Score

Debt-to-income ratio is the amount of monthly debt obligations, like car payments, compared to your monthly gross income. Credit bureaus don’t have access to your income so there’s no way for them to factor it into your score. DTI ratios are most often used to determine how much home you can afford. Considering this, it’s a good idea to lower your debt to get a larger loan. However, when it comes to your credit score, your debt-to-income doesn’t affect it.

Myth #3 The Higher the Debt, The Lower the Score

Not all debt is the same! Debt from a mortgage, even a $300,000 mortgage loan, is considered “good debt” because a home is a financial investment. $15,000 credit card debt, on the other hand, is bad debt.

Keep your credit balances low, preferably below 15% of the credit limits, and you’ll be on your way to maintaining your FICO high.

Myth #4 Paying Off Collections Raises Your Score

This one is surprising. Once a collection agency is involved, your score is going to take major hit. Even after you pay off or settle the debt, the delinquency will still show on your report. The only way to remove it is by disputing it with all three major credit bureaus. It’s not easy but worth the effort!

Myth #5 Your Credit Becomes Joint with Your Spouse

When You Get Married Getting married doesn’t automatically include your spouse on your credit nor does it add you on theirs. If you want to be added to their account and possibly reap the benefits of their credit score, your spouse needs to call creditors to have them add you. 

Myth #6 A Better Job Means You’ll Have a Better Score

Despite credit bureaus having your employers information, they don’t have access to your salary or yearly income. So a better paying job won’t affect your credit score. On the other hand, higher income could mean you can now pay down debt –and that definitely increases your credit score! 

Myth #7 If You Don’t Use a Credit Card, You Should Close It

The longer your credit’s open, the better it is for your score, so you never want to close credit cards. However, creditors may end up closing it if there’s no activity so try to use it (and pay it off) every month to keep it open.

Myth #8 Opening a Credit Card will Hurt Your Score

This myth is a little tricky. While opening a new credit account will make your score drop initially, it’s only temporary. After a few cycles of payments, your new credit will start to rise again and even improve from where it was in the first place.

Myth #9 One Late Payment Won’t Lower Your Score Much

Payment history is the most significant factors in your FICO score. Even just one payment that’s late by 30 days lowers your score by 50 points or more. Don’t let this happen to you! Set up a reminder or automatic payment schedule and avoid making this costly mistake.

We partnered with Steven Millstein, Editor at CreditRepairExpert.org, for more information and a listing of the best credit repair companies out there. Visit this fantastic article: https://www.creditrepairexpert.org/credit-repair-companies/!

 

 

Don’t miss Alex Deacon’s October workshop! You won’t want to miss Alex and our special guest speaker Josh Caldwell discuss our most requeted topic: finding and analyzing real estate investments. RSVP below!

How to find and analyze my next RE Investment

Saturday, Oct 13, 2018, 10:00 AM

Hampton Inn Bridgeville
150 Old Pond Rd Bridgeville, pa

27 Members Attending

This is our most widely asked for workshop. We do this a few times a year and it will contain the steps you can take right now with very little experience. You can implement these steps and start using them in your day to day investment journey. We will discuss and hit on a few very important ideas on how to do the following 1. Where to look for …

Check out this Meetup →

Visit our affiliates!

MACE Property Management: www.PittsburghPropertyManagement.com

Tara Mortgage Services, LLC: www.Tara-MTG.net

HDH Settlement Services, LLC: www.HDHTitle.com

Burkhead Insurance Services: Burkhead.Insure

Bin There Dump That: www.PittsburghDumpsterRental.com

 

 

 

 

 

 

About the Author

Leave a Reply

%d bloggers like this: