10 Myths Keeping You From A Good Credit Score

1. It Needs a Lot of Time for Your Credit Score To Become Bad

 While it takes sometimes years to build up a good credit score, you can destroy it in a matter of months. Once your accounts are six months overdue, the creditor will simply charge them off. This is among the most damaging things that can afflict your personal credit score. 

It only needs a few accounts charged off to collections for you to entirely ruin your credit score. 

2. Checking Out Your Credit Will Harm Your Score

Actually you are able to pull your own credit report and score as often as you like without damaging it a bit. The key is to use the third party credit scoring services like Credit Karma or Discover It rather than creditors to view it. You are the only one who will see the resulting soft hits on your credit report from you checking it out. 

3. Bad Credit Scores Hang Around Forever

Bad credit scores only remain terrible for all time if you continuously harm your credit score by maxing out credit cards, paying balances late, and allowing your accounts to be sent out for collections. If you begin to effectively and properly manage your own credit, your personal score will get better with time. How much time depends on how badly you damaged it in the first place. 

4. You Must Earn A Lot of Money to Attain A Good Credit Score

The amount of money you earn only indirectly impacts your credit score. Income is not a determinant in your score at all. Your ability to pay your bills is what the algorithms are concerned about. Regardless of the amount of money you possess, paying your bills on time is critical as the smartest way you can positively impact your credit score (and it counts for 35 percent too).

5. Every Person Only Has One Credit Score

You will always have a few credit scores thanks to the varying credit score models in existence. The two models of FICO and Vantage Scoring draw on three different major credit bureaus for their data, meaning that you have at least six main credit scores altogether. Generally these will not vary by more than a few points from one another. 

6. Prepaid and Debit Card Use Will Build Up Your Credit Score

If you think that gaining a debit card or prepaid credit card will boost your credit score, you are mistaken. Neither of these types of cards have a credit feature to them. Your card history with either type does not factor into your credit score or appear on your credit report.

Try getting a secured credit card instead.  Otherwise, the main products you want to build up your credit are loans, credit cards, and store charge cards. Having more of these varieties will help you in the credit mix category that makes up 10 percent of your FICO score.

7. Closing Credit Cards Will Boost Your Score

Actually you are more likely to do harm to your credit score than to improve it when you close out credit cards. If you close a card that still has a balance, this is especially the case. It is generally better to leave open accounts with good payment histories. This will help you keep your credit utilization down to under 30 percent (for 30 percent of your score). Open timely paid accounts show a positive payment history too (for 35 percent). 

8. Having Money In Your Bank Account Improves Your Credit Score

Credit scores do not at all consider bank account balances (or assets of any kind). It is likely that good credit history corresponds to having savings, but this is unproven. There are many professionals with a great deal of money who have poor credit scores for not paying off their bills or making their payments on time every month. In today’s world, a higher credit score is likely better for you financially than saved money in the bank, if you have to choose between the two. 

9. Paying Off A Collection Account Will Stop It From Hurting Your Credit Score

Repaying collection accounts will improve your credit score over the longer term, but it will not provide you with an instant boost when you pay off a collection. Collection accounts remain on your credit report for seven years regardless of whether you pay them off or not. This will harm your credit score until it drops off finally. 

Collections less than $100 do not have much impact if the lender is using one of the newer credit scoring models that disregards such low collection account amounts. You are better off paying down a balance on an account in good standing (which will immediately improve your credit utilization component) than paying off a collection account.

10. It Needs Seven Years to Improve Poor Credit Scores

The majority of negative information that finds its way on to your credit report lasts for seven years. The good news is that as this derogatory information gets older, it has a smaller impact on your credit score. By making on time payments and maintaining a manageable level of debt (to under 30 percent of your credit utilization), you can significantly improve your personal credit score long before the derogatory remarks drop off your credit report. 

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