Credit-Score Myths

The 4 credit scoring myths

1. Closing accounts can help your credit score.
(you should pay off your credit cards if at all possible, if you close the accounts yourself it is still viewed by mortgage brokers as if you filed for bankruptzy. In some voodoo like way your credit score is based on your available credit and what you are using. When you shut down an account you ‘Shrink’ your available credit and your debt looks larger which hurts your score. Also by closing accounts you can make your history look younger.

2. Checking your FICO score can hurt your credit.
(Wrong again, think about it. You get envelopes in the mail all the time from
credit card companies trying to give you a credit card. They ran an automatic check and if you fell within a certain range they send you a notice. If this actually hurt your score then every person in the U.S. would have a ZERO. The truth is that applying for New Credit hurts your score. The trick is to shop for new credit within the same 14 days. The FICO score treats multiple inquiries within 14 days as one and ignores all inquiries made within 30 days prior to the day the score was computed. As a general rule, one inquiry will usually knock off about 5 points. Scores can range between 300 low to 850 perfect.)

3. Credit counseling can hurt your score just like bankruptcy.
(Nope, wrong again. The current FICO formula ignores any reference to credit counseling that may be in your file. This has been true since 1999 and since researches from Fair, Isaac and the company that created the FICO scoring system discovered that people who get credit counseling didn’t default anymore than anyone else. Your ability to get a loan may be hurt by credit counseling because of what the lenders have reported since you opted to go the Credit Counseling Route. Lenders can consider whatever factor they want to help them decide if they should give you the loan. Some may look at your income, some your total amount in savings, some may think bad things about Credit Counseling and some may see it as good. If you find a lender who does not like the fact that you enrolled in Credit Counseling then be prepared to be treated just like you filed Chapter 13. They will may still give you the loan but at an interest rate equivalent to extortion. Best advice, steer clear of getting any loans till you pay the entire amount owed to Credit Counseling Service.

4. FICO is the only score that counts.
(Nope, you are incorrect. In fact there are three agencies. Each agency gives it score based on the formula provided by Fair and Isaac but each agency gives it a different name. At Equifax they call it the ‘Beacon Credit Score’ and at TransUnion they call it ‘Experica’ and at Experian it is call ‘Experian/Fair, Isaac Risk Model.’ Once checked you will have three different scores from all three agencies because they do not share information.