When it comes to maintaining healthy credit, what you do not know can in fact harm you.
Here are 6 credit misconceptions that refuse to pass away:
Myth # 1: Closing an old credit card will trigger your rating to decrease due to the fact that you lose the value of the age of the card in your credit ratings.
Fact: Your credit scores still consider the age of your charge card accounts even if they’ve actually been closed.
This myth has gotten momentum over the previous couple of years and is close to capturing “credit scores are made use of by employers” as the most common credit misconception spread by those who aren’t in the know.
Not just do shut credit cards still consider the age related metrics of your credit scores, but they even continue to age after they have been closed.
A 10-year old charge card will be an 11 year old charge card the same time next year.
Myth # 2: The credit rating companies offer your credit reports to lenders.
Fact: A credit score agency isn’t the same as a credit reporting company.
Credit score agencies grade debt responsibilities such as corporate bonds or mortgage supported securities. They do NOT grade the grade specific customers.
Moody’s Investors Service, Requirement, and Poor’s and Fitch Ratings are the huge 3 credit rating companies.
Credit REPORTING agencies, on the various other hand, do grade the danger of individual consumers. That’s exactly what a credit score does.
Equifax, Experian, and TransUnion are credit reporting companies, not credit score companies.
Myth # 3: Credit scores and credit reports are the same thing.
Fact: Credit reports and credit scores aren’t at all the exact same thing, however people utilize the two terms reciprocally as if they were which’s where numerous errors are made.
A credit report is just a collection of information about a consumer including your personal recognizing information, your liabilities, some financial-related public records, 3rd celebration collection accounts, and inquiries into your credit report.
A credit score is a numerical grade based upon the majority of that details (all but the individual info). A credit score is a product sold along with a credit report, however it isn’t a part of your credit report.
Myth # 4: You’ve a credit rating.
Fact: You’ve many credit ratings.
There are 2 credit scoring models that are the most commonly used by lenders: the FICO credit rating and the VantageScore credit score.
You’ve more than 50 various FICO credit ratings because there are over 50 FICO scoring models commercially offered today, and there are three versions of the VantageScore credit rating commercially offered today.
We are in fact simply scratching the surface since there are numerous other scoring versions utilized by lenders to anticipate risk, the likelihood of you filing bankruptcy, whether you’ll reply to a credit card offer, whether you’ll stop utilizing their charge card, whether you’ll be an unwanted insurance danger, and whether or not you’ll be a lucrative consumer.
You’ve hundreds of scores, not simply one score.
Myth # 5: Credit scores punish you for not having any debt.
Fact: Credit scores reward you, significantly, for not having any debt.
I know most of the previously mentioned misconceptions are spread out by mishap, but not this one.
This one is intentionally spread by credit card haters and credit score haters.
The what’s what’s that there are several measurements in credit scoring systems that penalize you for having debt, having debt that’s too near your credit limits or loan quantities, having a lot of accounts with balances, and having unpaid balances.
Myth # 6: Credit scores are used by companies as part of work screening.
Fact: Not just are credit scores not used by companies, but they are not even offered to companies.
We can blame this one on myth number 3 above.
Credit REPORTS can be utilized for employment evaluating purposes and given that many people think credit reports and credit scores are the same thing, we see numerous short articles and information tales suggesting that your FICO or VantageScore credit scores can disqualify you for a task.
This myth is so persistent that legislators have even suggested legislation to ban using credit ratings in the employment evaluating processes.