Less Importance of Credit Score

Credit Score Mythology

There is so much information out there on improving your credit score that it is hard to know what really works. Because most people never take a class or fully understand the credit system, a host of myths and misinformation has developed regarding the subject. Some of these misnomers may seem logical or possible, but really have no grounds for proof. Sadly, much of this information is coming directly from sources that should know what they are talking about, such as bank representatives or mortgage lenders. For this reason, it is important to be aware of the basic credit score myths to keep from wasting your time or even hurting your score.

Perhaps the most common piece of bad information that people receive concerns their current accounts. If a broker or other individual claims that closing accounts will improve a credit score, they are completely flawed in their logic. Yes, having too many open accounts will reflect negatively on a score, but closing existing accounts is another matter. Once the accounts have been opened, the damage is done, and it is best to keep them open. Shutting accounts can actually hurt your score. The amount available to an individual is one factor affecting credit scores. When accounts are closed, the amount of available credit shrinks, making account balances seem larger by comparison. Paying down debt is an excellent idea, but in the process, leave opened accounts open.

Many people believe that checking your FICO score can actually hurt your credit. This is another common confusion due to the fact that certain inquiries can hurt it while others do not. Applying for new credit will often hurt your score, but ordering a copy of your report will not. Mass pre-approval inquiries also go unpunished. When a score reduction is caused by an inquiry of some kind, it will only change the score by 5 points or less, so even in this event, this is not a huge factor in your score.

Your ability to qualify for certain loans may be impacted by the use of counseling, however, many people think that counseling will scar your credit in the same way as bankruptcy. This is simply not the case. The most current FICO formula actually ignores counseling all together. This was a change that occurred due to a research study conducted three years ago that supports the fact that people using counseling did not default on their debts any more than other people. However, take note that using counseling might impact your ability to qualify for certain loans. Sometimes, counseling agencies make late payments to your creditors or settle for lesser amounts, and these things will show up on your score, but the use of counseling in general will not negatively change your credit.

These myths are some of the most widely accepted misnomers about the industry. Understanding their falsehood will help you to manage your credit more knowledgably or seek the right kind of help to repair your credit. If a broker, counselor, lender, or agent tries to feed you one of these myths, you might seriously consider how knowledgeable they really are about everything else involving your credit.

Credit and Credit Score

Using Credit To Build Credit Scores

Many experts agree that restoring credit scores often depends on how wisely you use credit after a financial bump in the road. Obtaining credit when one has damaged credit is not as difficult as one might think. There are many unsecured and secured credit card offers that are designed specifically to help you restore your FICO score to excellent levels. If you have damaged credit, I strongly urge you to investigate offers of credit that are specifically designed to build credit scores. But, be forewarned, you must use the cards wisely or they will have the opposite effect, one other than intended.

What follows are some important tips for using credit cards wisely. The advice below is aimed at those working to rebuild credit but it is good advice for anyone.

• Try not to carry a balance on the card. Pay what you owe promptly and pay all of what you owe if you can. If you must carry a balance, pay more than the required minimum payment. This will help you avoid high interest charges and, over the long haul, will save you hundreds and perhaps thousands of dollars.
• Do not use your credit cards without keeping accurate records of your spending. Keep your receipts, write down your card use as you use the card in a place certain (I use my date book for this purpose). You should always know what you have charged and when any given transaction took place. Aside from helping to control spending this simple technique will help you avoid identity theft.
• Never use your credit card for consumable items. Don't buy groceries, gas, medicine, and so on. If you don't want to carry cash, use your debit card for these purchases. My rule of thumb is if the purchase has no lasting value to me or to my family I pay in cash or with a cash equivalent (debit cards or checks). Of course, don't forget to keep track of these transactions as well.
• Do not be afraid to switch cards in order to reduce your interest rate, avoid annual fees, or two-cycle billing. While you are in the process of rebuilding credit this will not be a serious option, however, once your FICO score increases to something over 650 the possibilities of obtaining new credit may prove to be advantageous to you.
• There is probably no good reason to carry more than two credit cards for personal use. If you have more than two keep the two with the lowest interest rate and cancel all others. If you need more than two cards you are probably not managing your credit purchases well.

credit card abuse begins with not having a clear picture of how much you are spending and how you are using credit. Following these few simple tips will help you gain control of your credit card spending, help increase your credit score and help you to build a bridge to your secure financial future.

Credit Score. Basic Notions.

Credit Score. Basic Notions.

There's a lot of confusing information about credit scores out there. There are people out there who believe that they don't have a credit score and many who think that their credit score doesn't count for much. Your credit score can spoil your chances of getting some jobs, of good interest rates and even your chances of getting some apartments.

The fact is if you have bills and a bank account then you have a credit score and your credit score matters more than you might realise. Your credit score is may be refered to by a number of other terms, including a credit risk rating, a credit rating, a FICO rating, a FICO score or a credit risk score. All these terms refer to the same thing the three-digit number that allows lenders get an idea of how likely you are to repay your bills.

Each time you apply for credit, apply for a job that requires you to handle money, or even apply for some more exclusive types of apartment living your credit score is checked.

In fact, your credit score can be checked by anyone with a legitimate business and reason to do so. Your credit score is based on your past financial responsibilities and past payment records and credit and it provides potential lenders with an easy snapshot of your current financial state and past repayment habits.

Your credit score lets lenders know fast how much of a credit risk you will be. Based on your credit score lenders decide whether to trust you financially and give you better rates when you apply for a loan. Apartment managers will decide whether you can be trusted to pay your rent on time. Employers will decide whether you can be trusted in a high responsibility job that requires you to handle money.

There's quite a bit of misinformation circulated about crdit scores especially through some less than scrupulous companies who claim that they can help you with your credit report and credit score, for a fee of course.

Advertisements and suspect claims can mislead you to the point where you may come away with the idea that in order to boost or fix your credit score, you will have to pay a company or leave credit repair in the hands of the so-called 'experts'. This is not necessarily the case. It is possible to bring down debts and boost your credit by yourself with no expensive help at all.