No matter if you are an employee, a businessperson, proprietor, insurer or a lender, good or bad credit score has a huge impact on the financial life of everyone. While there are many factors that affect credit score however, there are many myths as well and it is important to learn to distinguish between the two in order to succeed at building up your score. Credit score is a rating given in numbers ranging from 300-850. This rating is a representation of all the information in your credit report. However, surveys have shown in America that the reason for bad credit among half of the citizens is most individuals don’t properly understanding the factors which determine a credit score for any individual. The majority of people have very limited knowledge about how this score is measured and maintained.
A credit score of a person measures his credit risk. According to a survey done by Opinion Research Corporation for Consumer Federation of America, only 51% of the total population understands that credit score is a measurement of their credit risk. Moreover, another 45% falsely believe that if they have high income, they are going to have higher credit score. This is just a myth and actually incorrect. Credit score is a very influential figure in a financial life of everyone. A lot of media coverage has been offered to this topic and information about credit score is spread on TV, News and radio, but still, many people do not have considerable information about this.
By learning how influential your credit score rating is it will help you realize the importance and work out and maintain a good rating. Let’s say for instance, you have a credit rating of 580. You will have to pay 3% more in form of mortgage interest, than what you would have paid if you had a credit rating of 720. It means the higher your credit rating, lower the interest rate you have to pay. Therefore, to make sure that you have your credit rating in your control, you should check your credit score periodically.
Not just to learn the number, but review it thoroughly and omit errors if there are any. Moreover, if you see your credit rating going down, you should take steps to improve it over time. The key to maintain a good credit rating is simple, paying your bills on time and keeping your balance low. In addition, you also want to make sure that you are not falling for some very common credit myths, which people falsely believe. These myths can lead you to damage your credit rating without even letting you know. You must learn and understand these myths, as to be aware will keep you safe from falling for these.
Here are top 10 credit myths, which people tend to fall for often.
You Have 1 Credit Score
It is commonly known and believed that there is one credit score for each individual but this is untrue as there is not one but three credit scores for each person. Each of these scores can vary as much as 50 points or more. It is important to know all three to evaluate your credit condition. Do not be mistaken by considering only one.
Checking Your Credit Lowers Your Score
Checking or making an inquiry into your own financial credit score is important if you want to keep it well-maintained. Checking your credit score is known as soft inquiry. Certain people have fallen for the false belief that by checking it, you lower your credit score. However this is false; you can check your own credit as often as you like with no negative effect.
It is Illegal To Repair Your Credit
It is one such myth that is furthest from truth but amazingly many people have fallen for this. Credit repair is not illegal; in fact, you must understand that it is your legal right to be able to manage, repair and rebuild your credit score by legal means. As long as you are not taking a false method for it, there is nothing wrong with credit repair and it is certainly not illegal.
Bad Credit Is Not Fixable
You should learn and understand that you can build, manage and repair your credit fully and completely. Even when it is bad, you can fix it by sticking to a step by step program to improve it. You can take your credit rating from bad to excellent as soon as you can learn the factors affecting your credit rating. If you can control these factors, it means that you can control your credit rating.
One Cannot Fix Their Bad Credit on Their Own
This is yet another false belief. In fact, to be able to certain that you will fix your bad credit, the most important fact is to learn that you and only you can fix it. The only way you could do this with someone’s help is if you get a co-signer with really good credit on a new or existing loan and then make proper payments, but even still, you have to make the first step.
You cannot remove all negative items
The worst thing about credit reports is that, according to an estimate more than 70% of these reports contain errors. If you can figure out the errors in your credit report, you can get it fixed. You just need time, concentration and some knowledge to find these small errors in your report. If you can work your way through properly with knowledge and time at your end, you can remove any item from your credit profile, no matter it is negative, long overdue or any other factor involved. As long as you have the patience, persistence and organization to do it properly under the law, you can remove all negative items from your credit profile. Some items are a little harder to remove than others are, but it does not mean you can remove it. It might take more time, but it can be done, just remember to be polite but persistent until it is removed.
It is Going to Take Years to Clean up Your Credit
This is one of those myths that holds millions of people back to make an effort to clear bad credit, as they are made to believe that it is going to take years to recover from bad credit. This depends entirely on your financial performance. Keep paying your bills on time and try to keep your balances low (less than 30% of your limit). The more you will learn about the credit laws, the more ways you will find to get out of it quickly. It does not necessarily have to be years, you can start to see improvements to your credit score within 6 months; it depends totally on how much effort and time you put into it.
You Can Only Delete an Item Temporarily
For some reason, people are under false impression that when they delete an item from their credit score, it is only temporary. It is assumed that the deleted item will appear in the credit profile back after some time. This is again, false. There are cases in which, due to a careless attitude of an individual, a deleted item reappears in the profile, but there are certain ways to stop it from happening. You can learn various techniques and follow these to keep the deleted items in your credit profile from reappearing.
Having a High Salary Means a Better Credit Score
It is believed by many that high income boosts your credit ratings, but your credit rating depends on other factors like how much you put towards your debt, how much debt you are carrying and whether your payments are on time or not. Your salary effects your net worth and income, as well as your ability to pay off more debt but does not directly affect your credit score. Focus on paying your bills on time. If you keep adding to your annual income, it does not necessarily matter if you aren’t paying your bills on time.
Credit Card Offers Can Damage Your Credit Score
Although credit card offers might be annoying to you, they do not affect your credit score. You can have as many credit cards as you want and the type of card won’t damage your score but keep in mind that if you open many at the same time, that may negatively affect your score as the longer your accounts are open, the better your ranking will be. If you do get new credit cards, keep them open as long as possible without closing the accounts on your old credit cards and keep your balance well below half your limit.
It is important that you spend time on learning the laws and basic techniques to keep a good credit score or to fix a bad score and also to understand that building up credit is a habit which must be practiced continuously in order to maintain results.