Credit Score Myths to Avoid – CreditReport.com
Many Americans approach the idea of obtaining their credit scores with some degree of trepidation. In many ways, these scores are a reflection of your willingness to take responsibility for your actions and financial transactions. Your scores are used to measure your credit worthiness and it's also an invaluable tool for identifying ways to improve your financial planning efforts. While these scores are not a part of your final credit report, they are calculated based on the information gained from your report.
Some Common Credit Score Myths
Closing an Account Improves Credit Scores
A very popular myth is that closing an account will improve scores. While having too many open accounts may hurt your score, closing an account puts an end to your credit history with that creditor. This history plays a vital part in calculating your scores. If you want to improve scores, it's generally better to pay down your balances than it is to close your accounts—especially older accounts.
Ordering A Report Hurts Your Scores
Another popular myth is that ordering a report can hurt scores. While applying for a new line of credit may affect your score negatively, ordering a report does not hurt your standing. If you're in the market for a new home and you need to inquire with several lending companies, it's a good idea to do so in a short period of time. Multiple inquiries within a 45-day period of time are generally treated as a single inquiry.
Cancelling A Credit Card Improves Your Score
Another popular belief is that an open account can give the impression to lenders that you have debt. Experts contradict this notion saying that a good number of creditors do in fact prefer to see at least two or three active accounts as it offers proof of debt management and responsibility. In addition, should the account not be in use, there can be no negative impact on your scores. However, what could decrease scores is, for example, if you sign up for five charge accounts to take advantage of deals through the holiday season.
Consumer Counseling Damages Scores
One final myth that gets passed around the lending community is that seeking consumer counseling is as damaging as filing for bankruptcy. While this type of counseling may alert potential lenders of a credit concern, most lenders look at the bigger picture. Some even see consumer counseling as a positive sign of a commitment to making lasting changes in your payment habits.
For more information on credit score myths and realities, please continue to browse CreditReport.com.