Common Credit Score Myths
Credit score myths about fico score ratings are everywhere. Sometimes even lenders can give you poor advice and it's becomes hard to know who or what to believe. Bad information can cost you a lot of money no matter who you get it from and that can lead to higher mortgage payments.
Fico score ratings are used in most all mortgage lending and you need to know what will hurt or help your credit score. So to make it clear, here are the most common credit score myths.
Checking your credit report will hurt your credit score
Checking your own credit report or credit score counts as a soft inquiry and does not go against your score. However, if a lender or anyone other than you is checking your credit report, this is considered a hard inquiry and generally lowers your score about 5 points.
The credit score rating system treats multiple inquiries in a 14-day period as just one inquiry. The system ignores all inquiries made within 30 days prior to the day the credit score is computed. So if you want to minimize the damage from credit inquiries, shop for a loan in that short period of time.
Closing old accounts will improve your credit report score
Often, lenders will tell you to close your old and inactive accounts as a way for improving your credit report score. But 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. If you really have to close any accounts, it's better to reduce or close newer accounts instead. Applying for new credit is generally what hurts your score more than older accounts.
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. But each one gives a different credit score.
The reason each of the three major credit reporting bureaus will have three different scores is because they don’t all share the same data. So when checking your credit report, make sure it comes from the three major credit reporting bureaus: Experian, Trans Union and Equifax.
Examine your credit reports from all three major credit reporting bureaus before you apply for a big loan like a mortgage. Then, fix any errors in all three reports before you shop for a loan.
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.
But if you have had any late payments with creditors that 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 not consider lending you money if you are in credit counseling. Others may, but will charge you higher interest rates than if you had perfect credit.
The best way to improve 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 any of these common credit score myths.
Copyright © 2006 Bad Credit Mortgage Tips.com.com All Rights Reserved.
This article is supplied by Bad Credit Mortgage Tips.com where you can browse our recommended lenders, get bad credit mortgage information and refinancing tips.
Fico score ratings are used in most all mortgage lending and you need to know what will hurt or help your credit score. So to make it clear, here are the most common credit score myths.
Checking your credit report will hurt your credit score
Checking your own credit report or credit score counts as a soft inquiry and does not go against your score. However, if a lender or anyone other than you is checking your credit report, this is considered a hard inquiry and generally lowers your score about 5 points.
The credit score rating system treats multiple inquiries in a 14-day period as just one inquiry. The system ignores all inquiries made within 30 days prior to the day the credit score is computed. So if you want to minimize the damage from credit inquiries, shop for a loan in that short period of time.
Closing old accounts will improve your credit report score
Often, lenders will tell you to close your old and inactive accounts as a way for improving your credit report score. But 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. If you really have to close any accounts, it's better to reduce or close newer accounts instead. Applying for new credit is generally what hurts your score more than older accounts.
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. But each one gives a different credit score.
The reason each of the three major credit reporting bureaus will have three different scores is because they don’t all share the same data. So when checking your credit report, make sure it comes from the three major credit reporting bureaus: Experian, Trans Union and Equifax.
Examine your credit reports from all three major credit reporting bureaus before you apply for a big loan like a mortgage. Then, fix any errors in all three reports before you shop for a loan.
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.
But if you have had any late payments with creditors that 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 not consider lending you money if you are in credit counseling. Others may, but will charge you higher interest rates than if you had perfect credit.
The best way to improve 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 any of these common credit score myths.
Copyright © 2006 Bad Credit Mortgage Tips.com.com All Rights Reserved.
This article is supplied by Bad Credit Mortgage Tips.com where you can browse our recommended lenders, get bad credit mortgage information and refinancing tips.
posted by Gary at 9:32 PM
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