Five Common Myths About Credit

1.  Credit ratings are improved if you closed your credit card accounts.

FALSE! Closing your credit card contributes to the shortening of your credit account age, which is one of the largest clinchers your credit score. Your credit rating, therefore, will not increase if you do opt to close your credit accounts.

2. Credit scores are increased once you repay your installment loans.

FALSE! Settling installment loans will never improve your credit score. The detail with influences on your credit score is not the sum of money you spent for the loan, but the exact date you repaid the debt. The truth is, credit report officers are only interested in confirming even if you paid for your financial obligation before the deadline or not.

3. You can only have one credit score.

FALSE! In reality you can have as many as three credit scores. Each of the three major consumer credit reporting agencies in the country has its own process of computing your credit score. The data prepared by the three agencies translate to three credit scores with minute discrepancies. All three credit scores are accepted by the Fair Isaac Corporation (FICO), which is the company responsible for the preparation of your FICO credit scores.

4. You cannot erase a negative entry in your credit report before the seven-year requirement expires.

FALSE! A bad marking, may it be a late payment record or an existing debt listing, can be eliminated from your credit account. You can initiate this by asking for a goodwill adjustment from your creditors or by testifying against the inexactness of your credit report.

5. If you hold your credit card balance, then your credit score will improve.You can improve your credit by maintaining your credit card balance.

FALSE! It is actually the opposite. It is perfectly fine to maintain credit card activity; however, it has no implications on your account balance. Keeping a remarkably low balance or no balance at all is absolutely one of the best ways to preserve a favorable credit score and improve it.


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