Six Credit Score Myths Busted

There are many myths about how your credit score works, and what may help or hurt your credit score. Here are common myths about your credit score "busted."

It's important to earn and maintain a good credit score, because a good credit score may give you more financial options. Your credit score can mean the difference between meeting and not meeting your financial goals.

There are many myths about how your credit score works, and what may help or hurt your credit score. Here are common myths about credit scores, and the truths behind those myths.

Credit Score Myths and Truths

Myth: Your credit score only counts for borrowing money.
Truth: More people than banks, mortgage companies, and credit card companies check your credit. Others who check your credit include landlords, utility companies, department store charge departments, and even employers, especially for jobs where handling money is involved.

Myth: When you or someone else checks your credit score, it hurts your credit score.
Truth: Your credit score won't suffer if you check it regularly. In fact, you should check your credit report and credit score at least once a year. Applying for a lot of credit in a short time, however, may lower your credit score.

Myth: Closing paid off accounts always improves your credit score.
Truth: Paying off credit accounts can help improve your credit score, but don't close those accounts just yet. If you close your oldest accounts, you'll lose the history associated with them, which may lower your credit score by shortening your borrowing history. If you are going to close paid off accounts, close your newest accounts and keep your oldest accounts open.

Myth: You share a credit score with your spouse.
Truth: Unlike other things that you may share with your spouse, your credit score is yours and yours alone. If you and your spouse are looking to buy a home or refinance your home together, lenders may look at both of your credit scores. Also, any joint loans or credit accounts with your spouse will count toward both of your credit scores.

Myth: A serious financial crisis like foreclosure or bankruptcy permanently hurts your credit score.
Truth: While bankruptcy and foreclosure really hurt your credit score and make it quite difficult to borrow money; and bankruptcies and foreclosures stay on your credit record for 7-10 years, it's not impossible to recover from a serious financial fall. After a crisis, make sure you pay your bills on time, every time, prioritize your spending, and reduce your debt load.

Myth: Getting financial counseling or other help with debt may hurt your credit score.
Truth: Getting financial counseling or other help with debt has no effect on your credit score. In fact, financial counseling is essential to getting the best advice for improving your credit and making an action plan for managing your debt.

Myth: Those "credit repair" offers advertised may help improve your credit score.
Many "fast credit repair" offers you see advertised on the radio, TV, and Internet may not be your best bet to improve your credit score, and may even hurt your credit score. Like losing weight or getting in shape, the "quick fixes" don't really work, and the best way to get real results is through the slow and steady discipline of paying your bills on time, every time, reducing your total debt load, and using credit responsibly.

Make sure you get any promises or details about help with improving your credit in writing, ask a legal or financial expert to help you understand anything that isn't clear, and avoid signing or agreeing to anything that you don't understand or that seems too good to be true or too easy to do.

These are general recommendations not applicable to all financial situations. Every financial situation is unique. Further, the suggestions and recommendations contained within the content provided are not an assurance of any future result. Be sure to discuss your specific financial circumstances with a legal or financial expert. Contact us for more information.