People don’t always want to talk about credit scores and debt. So when they hear some information that they’re not quite sure is correct, they may not know where to turn for help making sense of it all. Here are some common myths about credit and some facts to set the record straight.
- You have to pay for credit reports. AnnualCreditReport.com will provide free credit reports every year. You can get them from all three credit bureaus (Equifax, TransUnion, and Experian) one at a time or all three at once.
- Your score goes down when you check it. If you check your score yourself through one of the main reporting agencies, your score will not go down. This is what’s called a “soft inquiry.”
- It doesn’t matter how often you apply for credit. This is sort of a half-truth. If you apply for multiple accounts in a short period of time, your score can be lowered. These are known as “hard inquiries,” and they happen when you authorize a lender to pull your credit report. Your score like likely go down only a few points due to these inquiries, so it’s not a huge factor and certainly isn’t the score-killer it used to be.
- Your education, race, gender or nationality can affect your score. This is absolutely not the case. The factors that go into your credit score include:
- Payment history
- Outstanding debt
- Length of history
- New credit
- Type of credit
- Credit counseling is bad. Counseling itself isn’t bad. Actually, a credit counselor can help you look at your finances objectively, suggest some budgeting tips, and help you fix some issues within your credit report. Where some people run into trouble is with debt management services that takeover the debt -- it’s important to read the fine print on these arrangements.
Separating fact from fiction isn’t always easy, but knowing how to manage your credit score can make a big difference in your financial future.
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