Top Credit Myths Debunked
Credit is a crucial part of your financial life, but there are many misconceptions and myths about how it works and how to improve it. In this blog post, we will debunk some of the most common credit myths and tell you how Credlocity can help you decipher credit facts from fiction.
Myth 1: There is only one credit score
Fact: There are actually many different credit scores, depending on the scoring model and the type of credit you are applying for. The most widely used scoring model is FICO®, which has several versions and ranges from 300 to 850. However, there are also other scoring models, such as VantageScore®, which also ranges from 300 to 850, but uses different criteria to calculate your score. Different lenders may use different scoring models or versions to evaluate your creditworthiness, so your score may vary slightly depending on who is checking it.
Myth 2: Checking your own credit report will hurt your score
Fact: Checking your own credit report does not affect your score at all. In fact, it is a good habit to monitor your credit report regularly to catch any errors or signs of identity theft. When you check your own credit report, it is called a soft inquiry, which does not impact your score. However, when a potential lender checks your credit report as part of an application, it is called a hard inquiry, which can temporarily lower your score by a few points. Hard inquiries are necessary when you apply for new credit, but having too many in a short period of time can signal that you are desperate for credit or a risky borrower.
Myth 3: All three credit reports have the same information
Fact: The three main credit bureaus—Equifax, Experian and TransUnion—collect and report different information from different sources. Not all lenders or creditors report to all three bureaus, or report at the same time or frequency. Therefore, your credit reports may have some discrepancies or inconsistencies among them. Each credit bureau also has its own algorithm and system for calculating your score based on the information they have. That is why it is important to check all three of your credit reports at least once a year to make sure they are accurate and complete.
Myth 4: Closing an account that is paid in full will boost my score
Fact: Closing an account that is paid in full may actually hurt your score in some cases. One of the factors that affect your score is your credit utilization ratio, which is the percentage of your available credit that you are using. Closing an account reduces your available credit, which can increase your utilization ratio and lower your score. For example, if you have two credit cards with a total limit of $10,000 and a total balance of $2,000, your utilization ratio is 20%. If you close one card with a $5,000 limit and a zero balance, your utilization ratio jumps to 40%, which can negatively impact your score.
Myth 5: Paying off a negative item will remove it from my report
Fact: Paying off a negative item, such as a collection account or a charge-off, will not automatically remove it from your report. Negative items can stay on your report for up to seven years from the date of the first delinquency, regardless of whether they are paid or not. However, paying off a negative item can still benefit you in several ways. First, it can prevent further damage to your credit by stopping additional fees or interest charges. Second, it can improve your debt-to-income ratio, which is another factor that lenders consider when evaluating your loan applications. Third, it can show lenders that you are taking responsibility for your debts and improving your financial situation.
How Credlocity can help you
If you are confused or overwhelmed by the world of credit, Credlocity can help you navigate it with ease and confidence. Credlocity is a comprehensive online platform that provides you with access to your credit reports and scores from all three bureaus, as well as personalized tips and tools to improve them. With Credlocity, you can:
Monitor your credit reports and scores regularly and get alerts for any changes or suspicious activity
Dispute any errors or inaccuracies on your reports with the click of a button
Learn how different actions affect your scores and what you can do to optimize them
Compare different loan offers and find the best rates and terms for your needs
Access educational resources and expert advice on various topics related to credit and finance
Credlocity is more than just a credit repair service. It is a credit empowerment platform that helps you take control of your credit and achieve your financial goals. Whether you want to buy a home, get a car loan, start a business or simply improve your credit health, Credlocity can help you get there faster and easier.
Ready to debunk more credit myths and discover your true credit potential? Sign up for Credlocity today and get started with a free consultation. Credlocity is the ultimate solution for all your credit needs. Don’t let credit myths hold you back from improving your credit and living your best life. Join Credlocity today and see the difference for yourself.
コメント