Believing Credit Myths May Cost You Money
Many people have a low credit score, and need to act smartly to rebuild their FICO credit. The average credit score in the nation is 692. This is the average not the median (half above half below) actually most of the people in the state (58%) have credit above 700.
This means that 42% have lower than 700 points and in some states the average credit score drops low to 668 (Nevada & Texas), unless those people do something to raise their FICO score, they are doomed to high mortgage and credit interest rates.
There are some myths that somehow became common and while people follow these myths by ignorance, they actually stay far from changing their credit situation. Here are some FICO credit myths that is worth staying away from.
Myth No’ 1 – ‘Checking My Credit Will Cause It To Drop’
Wrong! When a customer is checking their own credit (and they can do it once a year for free!) it is a ‘soft check’, not a credit inquiry. Self inquiry does not count like a lender or car loan inquiry.
Having to many inquiries can imply that too many financial bodies are unsure of giving you credit. And the FICO score can drop. The logic here is if others check you out too often then they probably know something is risky about you…
Myth No’ 2- ‘Close That Old Account To Pump The Score Up’
Wrong! One of the FICO report parameters is your credit history (15% of the score); having a ‘short history’ means there is not enough data collected on you and that makes you more risky. Closing old credit accounts will make all this data disappear from the reports and cause them to think you are fresh… and risky.
If you want to manage your credit better, and close accounts, it is best to close newer accounts and stay with the firm steady old accounts open.
Myth No’ 3 – ‘No Problem, I will Pay It And Forget It’
Wrong! The FICO reports have records of all your former credit behavior. Bad credit marks like tax liens, charge off, collection accounts, IRS unpaid bills will show for 7 years from the day they were first reported. Bankruptcies stay on report for 10 years! Paying old debts helps the credit get better, but does not erase the ‘remark’. (Even paid charges stay on the report, they will be shown as ‘paid’, which is better than ‘unpaid’).
Myth No’ 4 – ‘It’s O.K, I Am Only A Co-signer’
Wrong! Once your name appearers on any credit contract, you are equally responsible for it. So if you co-sign for a friend on their home mortgage or loan, or have joint accounts and those have some unresolved credit issues it will all show on your FICO score too. If your FICO is low, you can solve it by asking to be taken off any of these loans or accounts; or get those accounts on track.
Myth No’ 5 – ‘O.K, I Will Pay That Debt’
Wrong! Paying one single debt does not grantee that your score will increase. FICO score is a name for an algorithm developed by Fair Isaac & Co. (FICO) this algorithm includes so many variables that it is never influenced by one significant change. The best advise will be learning correct credit behavior and let the time do the rest (after fixing inaccuracies in the reports).
Myth No’ 6 – ‘So I Will Open New Credit Accounts’
Right & Wrong… As you may have seen one of the ways to rebuild FICO credit score is to have several types of credit accounts (mortgage & credit cards or credit cards & car loan) always have more than one single credit account active. So if this is your case, opening different types of credits will help! But if you have a car loan, having another car loan will not help, the same goes for more credit cards while you already have some cards… Its the diversity that counts more than the amount.
Credit Myths That Cost You Money
Any of these myths cause people with less financial education to assume they have been acting properly and fixing their credit score, while in the worst case they might even have damaged it even more! If you are in a bad credit situation, you need to get hold of yourself, just like a tooth ache, things will only worsen over time if neglected.
The best advise, if you have no clue where to start is to invest in a credit repair program that will take through all the steps and help you rebuild the credit. Closing the FICO score gaps takes some time, so it is best to start NOW, and get on the right track.
See this recommended Credit Repair University Program, you will have to invest less than $50 (one time fee) to get the no-brainers “tricks and tips” but the alternative is worse..
You are probably paying more than that each month to some greedy credit company, and paying to others to repair the score for you will cost $500+ so do your math .. don’t be cheap where financial education is required.