Real Estate - Get In The Know
Credit
Related Articles
Credit Report Myths
MYTH #3: Closing old accounts will boost my credit score.
FACT: This is a common misconception. It's not closing accounts that affects your credit score, it's opening them. Closing accounts can never help your credit score, and may actually hurt it. Yes, having too many open accounts does hurt your score. But once the accounts have been opened, the damage has already been done. Shutting the account doesn’t repair it and it may actually make things worse.
The credit score is affected by the difference between the credit that is available and the credit that is being used. Shutting down accounts reduces the amount of total credit available and when compared with how much credit you can use your actual credit balances are made to seem larger. This hurts your credit score.
The credit score also looks at the length of your credit history. Shutting older accounts removes old history and can make your credit history look younger than it actually is. This also can hurt your score.
You generally shouldn't close accounts unless a lender specifically asks you to do so as a condition for them giving you a loan. Instead, the best thing you can do is just pay down your existing credit card debt. That's something that definitely would improve your credit score.
MYTH #4: Shopping around for a loan will hurt my credit score.
FACT: When a lender makes an inquiry about your credit, your score could drop up to five points. Some borrowers think that if they shop around by going to a number of different lenders that each time a lender does an inquiry it will generate another reduction in the credit score. This isn’t true. For credit score purposes, multiple inquiries for a loan are treated as a single inquiry, as long as they all come within a 45 day period. So it is best to do your rate shopping within this 45 day window.
MYTH #5: Companies can fix my credit score for a fee.
FACT: If the credit bureaus have accurate information, there’s nothing that can be done to quickly improve your score if in fact you have a history of not handling your debts well. The only way to have an effect on your credit score is to show that you can manage your debts in the future.
Also, if there are errors in your file, you can contact the bureau yourself. You don’t need to pay someone else to do it. Each of the major credit bureaus has a website which clearly explains what you need to do to correct an error.
So, the best ways to improve your credit score are: pay down the debt, pay your bills on time, correct existing errors on your credit reports in each of the three bureaus and apply for credit infrequently. P