Credit score myths debunked
Image Source: Flickr User Pabak Sarkar
Not everything you read about credit scores is true. It’s important to separate fact from fiction when you’re trying to improve your credit score after bankruptcy. Today, we will take a dispel five of the most common credit score myths.
#1 Carrying Credit Card Balances Improves Your Credit Score
Many websites claim that 30% is the “magic number” you should never go above when it comes to your available credit, but that number is a myth, and so is the notion that carrying a card balance will help your score. What helps your score is having lots of available credit you DO NOT use.
Credit card companies offer you enhanced limits if you use your cards and then pay them off. Using each of your cards regularly and paying off in full each month is a better way to improve your credit score. Paying bills with your card is a great way to use plastic while avoiding debt.
#2 There is Only One Type of Credit Score
When people think of their credit score, they usually think, “FICO score.” But did you know that FICO has a bunch of different versions of its score, and many lenders have their own scoring methods and don’t use FICO at all?
FICO uses info on your credit report to develop their score. Other firms can pull your credit report and use the info to develop their own score. So really, keeping your credit report in good shape is the most important thing since that feeds all the credit score calculations.
#3 You Only Need One Credit Card to Keep Your Score High
This is not true. What’s more troubling is that many Millennials now avoid using credit cards altogether and prefer debit cards so they avoid debt. Having a variety of credit card accounts, all being used and paid off promptly, will benefit your score more.
Many people think having one card in their wallet is enough, but that’s not the case. Occasionally getting new cards and keeping them active but with zero balances will usually give you much better results than having just one piece of plastic in your wallet.
#4 High Income Means a High Credit Score
Your income has nothing to do with your credit score. What’s important is that you pay your bills on time, use credit wisely, keep old healthy accounts open, and occasionally open new accounts. Higher income can help with this, but it’s not a direct correlation.
Lenders for mortgage and auto loans will take your income into account as well as your credit score when deciding whether or not to approve you for financing, but income alone generally won’t get you anywhere and doesn’t drive your credit score.
#5 Disputing an Incorrect Item will Remove it from Your Credit Report
Credit repair companies and other gurus might tell you they can get negative items off of your credit report. What they really mean is that they can get “inaccurate” items off your credit report, but even that isn’t necessarily the truth of the matter.
If you find an inaccurate item on your credit report and file a dispute, the creditor has to either prove they’re correct or fix the listed item. Or, if the item is aged out or incorrect, the credit agency or creditor can remove it. Most often, though, the creditor will simply correct rather than remove an item.
Top Credit Score Myths Debunked—Tips for North Carolina Consumers
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