There are too many misconceptions about how credit scores work. Here are the top three myths about credit reports and scores, along with the answers youve always wanted.
Myth #1: Checking your credit report can hurt your score.
Truth: Checking your own report or score will not negatively impact you! Its helpful for you to know whats being reported about you, and there is no penalty for that. The source of confusion here, is that if you request lenders to check your credit to open a new account, that will show up on your credit report. Too many credit checks by third parties can negatively impact your score.
Myth #2: You only have one credit score.
Truth: There are numerous credit scoring models. All are developed to tell you the same thing: How much of a risk do you represent to lenders? While the varied scores may differ in numerical values, youll find that they should be consistent in terms of the underlying meaning. If youre risky by one score, youre risky by another.
Myth #3: Closing accounts can help your score.
Truth: Closing accounts is rarely beneficial to your credit score. If there is a negative item being reported on your credit score, closing the that account will not remove it from your credit report. In fact, if the account you close was a credit card then closing it would reduce the amount of credit available to you in the future. If closing a card would dramatically increase your credit utilization ratio, or make you appear maxed-out, then this could actually hurt your credit score.
This is no myth, check your credit report and score. Knowing the information and value of it will help you leverage it to your benefit. Sometimes closing an account is necessary, but think about the repercussions beforehand.