If you’ve never ordered your credit report before, you might not know what does (and doesn’t) affect your credit score. Seven common credit score and credit report myths are explained.
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Myth: You can earn good credit by paying household bills (cell phone, electric, cable) on time.
These are not credit and do not show up on your credit report if you are paying on time. However, if you don’t pay these bills they could eventually end up on your credit report. This typically happens when the bill has been sent to collections, at 45+ days late.
Myth: Your credit score is the same across on all the credit reporting agencies.
There are three credit reporting agencies-Equifax, Experian, and Transunion. Your score will likely be different on each one.
Typically the scores are within the same general range-within 30 points of each other. It is possible for there to be larger score differences between the various credit reports; I’ve seen differences of 100+ points between the three credit reporting agencies.
How does this happen? When you have a loan, the lender will report your payment history to the credit bureau. Some lenders will report your history to all three bureaus, others may only report to a single bureau. This can also occur if you have past due accounts or collections–the negative payment history may only appear on one credit report.
Since your report can vary, it is important that you check your credit report from each reporting agency for accuracy.
Myth: Paying your mortgage (car, etc) a few days late will hurt your credit.
While your lender won’t be happy with you, and may even start calling you, late payments won’t show up on your credit until you are 30+ days late.
Myth: If your credit stinks, there’s no point in trying to get better credit.
Your credit score changes with each month of payment history. Start making payments on time and work on paying off any collections. The longer you go with on-time payments, the better your score will become.
A friend of mine went from a very poor credit score (under 500) to a decent credit score (650) in 3 years by paying on time and working to correct negative accounts. Smaller increases in score can be seen in even less time.
Myth: Once an item is on your credit report, there is nothing you can do about it.
If the information on your credit report is incorrect (yes, it does happen!), you have the right to dispute the item. Most often, I see the balance or account status reported incorrectly.
Myth: Checking your credit will hurt your credit score.
When you check your own credit, it does not affect your score. When a lender requests your credit report, these inquiries can hurt your score.
Typically a single inquiry would lower your score a few points and doesn’t really affect your overall credit. However, inquiring with several lenders (who all pull a copy of your credit report) could make a significant difference in scoring.
Myth: Asking for a limit increase will hurt your credit.
Yes and no. The lender will probably run an inquiry which may lower your score a few points. However, having a greater percentage of available credit increases your score. Just don’t be tempted to spend more!
Did you believe any of these credit myths?