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Debunking Credit Score Myths

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February 13, 2019

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Improving your credit is possible, but it’s hard to know where to start. There is a lot of misleading information out there, and these credit myths can get in the way of improving your credit score. 
Your credit score is important for determining things like whether you’ll be able to qualify for a loan or credit card offers and the interest rate you’ll pay.

A good credit score gives you more options for your financial journey so it’s important to be confident when managing your credit. Here are some of the most popular credit myths debunked:

Myth #1: Checking my credit report will hurt my credit score.

Fact: Getting your free annual credit reports will not hurt your credit scores, and can be an important tool to make sure your information is accurate and up-to-date.

Requesting your free annual credit reports or purchasing your credit report will not affect your credit score. You can – and should – get your free credit reports from every 12 months. Reviewing your credit reports regularly gives you an opportunity to quickly identify and fix any inaccurate information.

Myth #2: I only have one credit score.

Fact: You have multiple credit scores.

Many credit scores are available to you and lenders. Often, the score you see isn’t the exact same as the one the lender sees. Your score depends on which credit reporting company provided the information used to calculate the score, the scoring model, the type of loan you’re seeking, and even the day when it’s calculated. Because of this, it’s normal to see slightly different numbers throughout the year and from different sources.

Myth #3: Getting loan estimates from multiple lenders will hurt my score.

Fact: Shopping around for credit and comparing loan offers can help you find the best terms and won’t impact your score much if done in a short period of time.

Comparing offers before getting loans and credit cards can help you find the right offer for your needs. Shopping around for credit cards, auto loans, and home mortgage loans could mean paying less in the long run because you’re taking time to find the best rates and terms. For most people, any negative effect on your score from multiple requests or inquiries for your credit score or report will be small, while the benefits of shopping around could be significant. You can also minimize any negative impact by doing all your rate shopping in a short amount of time.

Myth #4: Carrying a balance on my credit cards will improve my credit score.

Fact: Paying off your credit cards in full every month is the best way to improve a credit score or maintain a good one.

Part of your credit score depends on the amount of credit you have versus the amount you’ve used – known as the credit utilization ratio. You can get your ratio by dividing your total credit card balances by your credit limits.

Keeping a low credit utilization ratio—under 30 percent—shows lenders you’re responsible and have available credit, so it’s important to pay off your entire balance to keep the ratio low to strengthen your credit score.

Myth #5: You can pay companies to quickly fix your credit.

Fact: Only the passage of time, and good credit management, will make accurate negative information disappear from your credit reports. You cannot speed up the process, and neither can a credit repair company.

Any person or company that advertises a quick fix for a price may be scamming you. There’s no quick way to boost a credit score when all the information on a credit report is correct. 
To improve your credit standing:

  • Consistently pay your loans on time
  • Keep your credit balance low
  • Fact check your credit reports and dispute any errors
  • Only apply for credit that you need

Myth #6: There are only three companies that create the credit reports lenders use to decide my loans options.

Fact: Equifax, Experian, TransUnion are the three nationwide credit bureaus. But, there are also other kinds of consumer reporting companies.

These companies may use information such as your employment history, transaction history with a business, or repayment history for a particular product to create a credit or consumer report about you. Generally, these reports are used for purposes other than lending, like employment, tenant screening, insurance etc.

Many consumer-reporting companies in addition to the three nationwide credit bureaus also offer a free copy of your report every 12 months. However, some do charge a fee for you to get your report. The Consumer Financial Protection Bureau has put together a list of consumer reporting companies along with information about how you can get copies of your reports.

Looking for more information about credit reports and scores? Whether you have questions about what to look for on your credit report, common credit issues, or how you can get and keep a good credit score, The Consumer Financial Protection Bureau has resources that can help.

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