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Truths and Myths of Credit Scores

by Joe Klarman

Are you thinking about buying a home sometime soon? If you are, then odds are you’ll need to apply for a mortgage. Very few people are able to afford to pay for the full cost of a home out of their pockets. However, if you plan on applying for a mortgage, one thing that you’ll need to keep an eye on is your credit score. Your credit score can determine whether or not you qualify for good terms – or if you qualify for a mortgage at all. Unfortunately, there are a lot of credit score myths floating around that can be quite confusing. The following are a few credit score truths and myths to be aware of:

Credit score truths

The following are a few things you should know about credit scores that can help you maintain or improve yours:

  • Credit reports aren’t always accurate – Don’t assume that your credit report is 100 percent accurate. When you get your credit report, always go through it to make sure there aren’t any mistakes. You can report these mistakes to have them taken off your report, thereby helping improve your credit history and score.
     
  • Paying for everything in cash can help your credit rating – This is true to an extent. If you are working on paying down your credit card debt, then you should try to use cash for whatever you’re buying so that you don’t raise the balance of your credit cards. However, having credit cards with a zero balance over a long period can hurt as well.
     
  • You can pay for someone to fix your credit – This is also true to an extent. There are credit repair companies that will carefully go through your credit report in order to find any mistakes, then report them over and over gain to get them fixed. However, they aren’t going to make any blemishes simply disappear.
     
  • The amount of money in your bank affects your credit – While your score isn’t affected by how rich or poor you are, the amount of money you in your account have can affect your score. If you use your debit card or checks and overdraft because you don’t have enough money, that will damage your credit.
  • Having too many credit cards can hurt your score – Every time you apply for a new credit card, your credit score is hurt. Lenders looking at your credit report are going to be suspicious if you have a lot of credit cards as well.

Credit score myths

The following are a few credit score myths to avoid:

  • Paying off your credit cards will make your credit report spotless – Paying off your balance will help improve your score, but remember that your credit report is an overall credit history, not a snapshot of your present financial situation.
     
  • Canceling your credit cards will improve your credit score – Because you are lowering the total amount of credit you have, canceling credit cards can actually hurt your score.
     
  • Paying your bills on time means you don’t have to bother with your credit report – You still need to check your credit report for mistakes and know what your score is.
     
  • Checking your credit report will hurt your credit – You can check your credit as many times as you want without hurting your score.
  • Your three credit reports will be the same – They will usually be different from each other, but not by much.

These are some of the credit score truths and myths that you should know as you strive to improve your credit.

10 Credit Truths

by Joe Klarman

When it comes to learning about your credit, there’s a lot of false information out there. The following are 10 credit truths that will help you understand credit better:

  1. Paying down your debts won’t instantly make your credit perfect – Paying off your debt will certainly help improve your score. However, your credit report doesn’t just show your present financial situation. It’s a snapshot of your credit history, which means that if you have any blemishes on your credit history, they’ll show up on your report.
     
  2. Canceling your credit cards won’t boost your score –Your credit score is affected by your credit utilization. Say you have two credit cards, both with $500 in credit available. If one credit card is maxed out, then you are using $500 out of $1000 in credit. That’s 50 percent of your available credit. If you close out the card with nothing on it, you are using $500 out of $500 – that’s 100 percent! You can actually hurt your score by closing your credit card.
     
  3. Just because you pay your bills on time doesn’t mean you shouldn’t look at your credit score – Paying your bills on time is a good way to improve your score. However, you’ll want to know what your credit score is and make sure that there aren’t any mistakes on your report since these can affect your score negatively.
     
  4. Checking on your credit score won’t hurt it – When companies check your score, it can hurt it slightly. However, when you check it yourself, no damage will be done to it. You can check your score as much as you like, although you may have to pay for it since you only have free access once a year.
     
  5. Credit reports aren’t always accurate – Credit reports can have mistakes on them. Make sure to report any mistakes you find to help improve your score.
     
  6. You can pay someone to help fix your score – You can pay companies to go through your credit report in order to spot any mistakes. They can’t make any blemishes go away magically, but they can help with errors.
     
  7. Good credit can be affected by the amount of money in your bank – This is true to an extent. If you over draft because you didn’t have enough money in your bank, it can hurt your credit score.
     
  8. Too many credit cards can hurt your score – Every time you apply for a new credit card, it will hurt your score a little bit, which means you don’t want to do it too much. Some lenders will also be wary they see you have 7 credit cards.
     
  9. All three of your credit scores will be similar – Although they can differ slightly, for the most part they will be similar.
     
  10. Paying with cash can sometimes help your credit score – This is true if it keeps you from maxing out your credit cards.

Be sure to keep these 10 credit truths in mind.

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Russell Jones Real Estate
536 Broadway East
Seattle WA 98102
Office: (206)323-0800
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