Myths about Credit Scores

If you are like most Americans, you are probably confused about your credit score. A good credit score can save you money in the long run, so it’s important to understand some basic facts about credit scores. The Huffington Post recently posted an article debunking the top 3 myths about credit reports and scores. Listed below are the top 3 myths, along with actual facts about credit scores.

1.      Myth: You have just one credit score.

Fact: You actually have many credit scores, from a dozen to a hundred. Different credit scores are given for different things. An auto lender will receive a different credit score than your mortgage lender. Although the scores can differ, they will all be in the same range. If you have a good credit score from one model, all scores are probably good.
 

2.      Myth: Checking your own credit hurts you score.

Fact: When you request copies of your credit score from an accredited organization, this is called a soft inquiry. When your credit score is requested for making lending decisions, this is called a hard inquiry. A soft inquiry will not hurt your credit, unlike a hard inquiry. You are also entitled to three free credit reports each year, so it’s easy stay informed about what your credit score is. The three major national credit bureaus that offer these reports are Equifax, Experian, and TransUnion.

3.      Myth: Closing your oldest credit card hurts your score.

Fact: Closing an old credit card account will not hurt your score, unless it’s your credit card with the highest limit. All accounts in your name, whether open or closed, will show up on your credit score for ten years. After ten years, credit bureaus will remove them from your credit report. Before you close a credit card, just be sure that all other credit card balances are low and not maxed out.

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