A lot of credit score myths about FICO score ratings get spread around and some of them are just false information. Sometimes even lenders can give you the wrong advice and it can get confusing. The bottom line is that bad information that costs you money no matter who you get it from.
It is vital that you know what will hurt or help your credit score points. To make it clear, here are some of the most common credit score myths.
Checking your credit report will hurt your credit score
Checking your own credit report and credit score counts as a soft inquiry and does not impact in a negative way your score. However, if anyone else like a lender or credit card company is checking your credit report, this is considered a hard inquiry and will generally knock off about 5 credit score points.
Closing old accounts will improve your credit report score
Sometimes even lenders will tell you to close your old and inactive accounts as a way for improving your credit report score. In most cases, closing old accounts will actually have the opposite effect with the current credit score rating system. Canceling old credit accounts can actually lower your credit score because it makes your credit history appear shorter.
You need to check more than just FICO score rating
If you ever hear this from anyone, consider it a red flag. All of the three major credit reporting bureaus offer FICO credit score ratings using the formula developed by Fair, Isaac. Even though each one gives the scores a different name you only need a fico score rating from the three major credit reporting bureaus.
At Equifax, the FICO score rating is called the Beacon credit score. At TransUnion, it's called Empirica. At Experian, it's known as the Experian/Fair, Isaac Risk Model.
Verify your credit reports from all three major credit reporting bureaus before you apply for a big loan like a mortgage. Fix any errors in all three reports before you shop for a loan because it takes time to correct your credit report.
Credit counseling will hurt your score
The current FICO credit score rating system ignores any reference to credit counseling that may be in your file. The researchers at Fair, Isaac, the company that created the FICO credit scoring rating system, found that people getting credit counseling didn't default on their debts any more often than anyone else.
However, any late payments you've had with creditors will hurt your credit score. Credit counseling can hurt your ability to get a loan because you probably have had trouble paying creditors.
Some lenders will back away if you are in credit counseling. Others may see it differently, but usually will charge you higher interest rates than if you had perfect credit.
Lastly but not least the best way to increase your credit report score is paying your bills on time and paying down credit card debt. Check your credit report regularly for any errors and make sure you don't fall for these common credit score myths.
Visit free credit report for more information.
