Debunking 6 Myths About Credit Reports and Scores
Credit reports and scores have an impact on many aspects of consumers’ financial lives, so it’s no surprise that there is a lot of misinformation surrounding them. Misunderstanding credit reports and scores and their impact can limit consumers and even lead to making less-than-ideal financial choices. Are you ready to let go of misinformation and learn the myths and facts about credit reports and scores? Let’s take a look.
Myth — Checking a credit report makes the credit score drop automatically.
Fact — There are two types of credit checks: a hard pull and a soft pull. Only a hard pull, which is conducted by creditors when applying for a new loan or credit card, can cause a credit score to drop. A soft pull, which is what happens when consumers check their own credit report or score, does not cause a credit score to drop.
Myth — You should only check your credit report if you suspect fraud.
Fact — Consumers should check their credit reports twice a year, whether or not they suspect fraud. It’s important to check to make sure the debts showing up on the report are actually yours. Not to mention it’s good to know where you stand, especially if you are considering a large purchase, such as a new vehicle or buying a home.
Myth — You can pay a company to “fix” bad credit.
Fact — Promises of quick-fix credit repair may be tempting, but the best way to increase your credit score is to practice responsible financial habits. This includes paying down unsecured debt like credit cards, limiting requests for new credit, and routinely checking your credit report for accuracy. Your score won’t increase overnight, but it can happen if you put in the effort.
Myth — Closing accounts with a zero balance will increase your credit score.
Fact — Paying off one (or many) credit cards is a wonderful achievement. But if you immediately close the account after doing so, it may actually cause your credit score to decrease. You’ll see the most benefit to your score if you leave cards open once you achieve a zero balance. If you’re worried about the temptation to continue using them, cut the cards, freeze them in a block of ice, or give them to a trusted friend or family member for safekeeping.
Myth — It takes seven years to improve a bad credit score.
Fact — While it’s true negative information can stay on a credit report for seven years, it impacts a credit score less as it ages. Continuing to make on-time payments and reducing the overall debt load will eventually start to outweigh any lingering negative entries.
Myth — Disputing a negative entry will increase your credit score.
Fact — Issuing a legitimate dispute for an incorrect entry on your credit report is one thing. But disputing entries on a credit report as a means of increasing your credit score is risky business. While it’s possible you’ll see a temporary bump in your score during the dispute process, the positive change won’t be long-lasting.