Credit Score Fact and Fiction

Most individuals who own credit cards annually check their credit scores with the big three reporting agencies: Experian, Equifax and TransUnion. These scores are very important in obtaining credit, loans, and lower overall interest rates. But with all the credit information flying around out there, you need to known exactly what's true and what's not. Such as:

Myth: There is only one credit score.

Fact: There are three credit scores, one from each of the aforementioned agencies.

Myth: Your score will decrease every time you check it.

Fact: Not true. You can ascertain what your score is as often as you need to and it will not lower your score at all.

Myth: Your FICO score is determined by income, age and gender.

Fact: False. Your score is determined by many factors, but those three are not part of the list.

Myth: The more money you have, the higher your credit score will be.

Fact: Not at all. The score is based on a timely payment history, keeping your debt under 50% of the credit available and other factors.

Myth: Only credit repair organizations can remove unfavorable information from your credit report and thus increase your score.

Fact: False. If you find inaccuracies on your credit report, you can easily dispute them yourself by writing to each agency individually.

Myth: The more credit card applications you receive in the mail, the lower your score will be.

Fact: Untrue. Even though you may be flooded with these applications in the mail, if you don't apply, your score is untouched. It's only if you apply, and wind up with many inquiries and/or high-balanced credit cards, that your score may be lowered.

Myth: Your scores will rise if credit card accounts are cancelled.

Fact: False. The truth is that it's typically better to keep a long-existing credit card account open, even though you may not use it. It has a history attached to it, and as far as the credit reporting agencies are concerned, older is better.

Myth: Applying for a new credit card to pay other credit cards raises your score.

Fact: Absolutely untrue. If you own $5,000 and you apply for another credit card to pay the $5,000 off, you're still in debt to the tune of $5,000. Depending on overall credit-to-debt ratios, your score may even suffer.

Myth: Having no credit cards at all is a good thing.

Fact: That's just wrong. At some point in your life, you'll likely need to establish a credit card history. It's a Catch-22 situation. Without credit, you can't create a credit history, and you'll have a tough time financing a car, buying a home or other big-ticket item you may wish to own. And you can't have a high credit score without a credit history.

Owning a credit card and working to obtain a high credit score will serve you well, as long as you don't incur expenses above your means. Pay on time; better still, pay off balances when you can and your credit score will work well for you.


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