Fact Versus Fiction About Credit Scores
- Asked By: admin
- Category: The Money Coach
FICTION: If I check my credit report often, all those “inquiries” will lower my credit score.
FACT: Your personal inquiries are called “soft” inquiries and do not impact your credit score at all. You can check your credit as much as you like with no negative impact, as long as you do it through a credit bureau or a company such as FICOâ authorized to issue credit reports.
EXPLANATION: Even though you may see all kinds of inquiries in your credit file, many have no bearing on your FICOâ score. For instance, your score does not count your own inquiries as well as those from existing creditors who are reviewing your account or lenders who are trying to offer you “pre-approved” credit.
FICTION: I pay cash for everything and don’t buy on credit or use credit cards, so my credit score should be excellent.
FACT: Having no credit history or never using credit can have a negative impact on your credit score.
EXPLANATION: It helps your FICOâ score to have some history of paying credit obligations on time. FICOâ reports that people with no credit cards tend to be higher-risk than those who have credit cards, use them periodically, and manage their debt responsibly.
FICTION: Closing my old accounts since I’m not using them any more will improve my credit score.
FACT: Depending on your overall credit profile, you can actually hurt your credit score by closing older accounts.
EXPLANATION: Generally speaking, it works in your favor to have older accounts in your credit file because it shows that you have a longer credit history.
FICTION: The most important factor in my credit score is whether or not I am “maxed out” on my credit cards.
FACT: The biggest determinant of your credit score is how well you’ve paid your bills on time in the past.
EXPLANATION: Your FICOâ score takes into account whether you’ve had late or missed payments, how far past due your bills were, how long ago the late payments occurred, and whether you have any collection items such as a repossession, foreclosure, or judgment against you.
FICTION: My age, race, gender, marital status, income, or place of residence can impact my credit score.
FACT: None of those factors are taken into consideration when your FICOâ credit score is determined.
EXPLANATION: Under U.S. law it is illegal to for credit-scoring to take into account race, age, nationality, religion, sex, or marital status.
Excerpted from Perfect Credit: 7 Steps to a Great Credit Rating
Related articles
- What Is the VantageScore and How is it Different from the FICO Credit Score? (askamoneyexpert.com)
- Will a Collection Account for Just $50 Hurt My Credit? (askthemoneycoach.com)
© 2010, The Money Coach. All rights reserved.
Lynnette Khalfani-Cox, The Money Coach is a personal finance expert, speaker, and author of numerous books on personal finance. She appears frequently as an expert commentator on television, radio and in print.
FICTION: If I check my credit report often, all those “inquiries” will lower my credit score.
FACT: Your personal inquiries are called “soft” inquiries and do not impact your credit score at all. You can check your credit as much as you like with no negative impact, as long as you do it through a credit bureau or a company such as FICOâ authorized to issue credit reports.
EXPLANATION: Even though you may see all kinds of inquiries in your credit file, many have no bearing on your FICOâ score. For instance, your score does not count your own inquiries as well as those from existing creditors who are reviewing your account or lenders who are trying to offer you “pre-approved” credit.
FICTION: I pay cash for everything and don’t buy on credit or use credit cards, so my credit score should be excellent.
FACT: Having no credit history or never using credit can have a negative impact on your credit score.
EXPLANATION: It helps your FICOâ score to have some history of paying credit obligations on time. FICOâ reports that people with no credit cards tend to be higher-risk than those who have credit cards, use them periodically, and manage their debt responsibly.
FICTION: Closing my old accounts since I’m not using them any more will improve my credit score.
FACT: Depending on your overall credit profile, you can actually hurt your credit score by closing older accounts.
EXPLANATION: Generally speaking, it works in your favor to have older accounts in your credit file because it shows that you have a longer credit history.
FICTION: The most important factor in my credit score is whether or not I am “maxed out” on my credit cards.
FACT: The biggest determinant of your credit score is how well you’ve paid your bills on time in the past.
EXPLANATION: Your FICOâ score takes into account whether you’ve had late or missed payments, how far past due your bills were, how long ago the late payments occurred, and whether you have any collection items such as a repossession, foreclosure, or judgment against you.
FICTION: My age, race, gender, marital status, income, or place of residence can impact my credit score.
FACT: None of those factors are taken into consideration when your FICOâ credit score is determined.
EXPLANATION: Under U.S. law it is illegal to for credit-scoring to take into account race, age, nationality, religion, sex, or marital status.
Excerpted from Perfect Credit: 7 Steps to a Great Credit Rating
Related articles
- What Is the VantageScore and How is it Different from the FICO Credit Score? (askamoneyexpert.com)
- Will a Collection Account for Just $50 Hurt My Credit? (askthemoneycoach.com)
© 2010, The Money Coach. All rights reserved.
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