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Credit score: some common myths and facts
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You can hardly overestimate the importance of credit rating. It is a reflection of your credit worthiness and affects your financial life in a major way. A low credit score can substantially limit your access to loans. Your credit score can be anywhere between 300 and 850. A score above 750is considered impressive.

There is a lot of confusion surrounding credit score. A large number of consumers have virtually no idea regarding what can and cannot hurt their credit. You might have a look at the following myths and try to separate fact from fiction:

Myth:
Ordering credit report can hurt my credit
Fact
Ordering credit report is essentially a soft enquiry. It is not a factor that is taken into account while calculating credit score. Therefore, it is completely wrong to assume that checking credit report has a negative effect on your score.
Myth:
Closing accounts has a positive effect on my credit
Fact:
This is an obsolete theory. A smart consumer should understand that closing an old account will actually shorten his credit history, which is not a positive thing. Also, closing an account will increase the ratio of debt to available credit.
Myth:
Co-signing a loan cannot harm my score
Fact:
This is a misleading statement. Co-signing means you are taking complete responsibility for the loan. So the loan details will be present on your credit report as well. Naturally, your score will be affected by the loan you co-signed.
Myth:
My husband's/wife's credit score will affect mine
Fact:
This is completely wrong. Your credit score will depend solely on your financial behavior. This is because the credit bureaus maintain credit reports on individuals, not on couples.
Myth:
All debt relief programs are bad for my credit score
Fact:
This is not totally correct. Your score gets lowered only when you pay back your debt partially. But all debt relief programs do not reduce your debt. If you file bankruptcy or enroll in a debt settlement program, you credit will take a hit. This is because they are debt reduction processes. On the other hand, enrolling in a debt consolidation or credit counseling program will not damage your credit rating in a major way.
Myth:
It is not possible to repair damaged credit score
Fact:
You can very well rebuild your credit score. Your credit score gets hurt when you do not pay back the debt completely or miss payments or take part in debt reduction programs. On the other hand, your credit gets a boost when you make timely payments on a regular basis. If your score has suffered a blow recently, consider taking a small and low interest loan. If you can pay back the loan on time, your score will definitely increase.
Myth:
My age and income largely determines my credit
Fact:
You should clearly understand that high income doesn't guarantee a high credit rating. Your income is not taken into account while calculating credit score. Similarly, many people have a notion that length of employment, gender and age can affect credit score. Once again, this is completely baseless.
Myth:
Negative information can be removed from my credit report immediately
Fact:
Many debt settlement companies will mislead you by saying that debt settlement or bankruptcy related information can be removed from your credit report within a short span of time. You have no good reason to believe them. Bankruptcy will stay on your report for 7-10 years. Settlement too will show on your report and cannot be removed overnight.
Myth:
"Cash only" option is the best for me
Fact:
You can play safe by always using cash. But this option has serious disadvantages. If you just use cash, you won't have any credit history at all. This means that lenders won't consider you suitable for approving loans. You will find it incredibly difficult to buy a home or a car.
Myth:
Paying off my credit card balances in full hurts my score
Fact:
Actually, it's the other way round. Your credit rating will soar if you are current on your payments. Even if you default on your credit cards, paying off the entire debt as soon as possible will always minimize the damages.

Maintaining a good credit score can be a tricky thing. So remember the above points and do not get perplexed.



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