Credit Scores – All The Things You Need To FORGET

Credit Scores – All The Things You Need To FORGET

There’s a hell of a lot of crap in most articles about credit scores. A bunch of half-baked myths combined with heaps of financial jargon has led us all down quite a confusing path.  In fact, a recent survey in the US revealed that half of Americans don’t know the factors which go into determining their credit scores, with forty per cent not even knowing what their current credit score is. So, if ever you’ve got this far, please continue. I might not be able to tell you about how to repair your credit score in a day, or how to consolidate all your debts into one fancy ass bit of new plastic, but I can tell you the things you DON’T need to do or think about.

1: There’s Multiple Types Of Credit Score
This comes up pretty frequently. Whereas Experian might like you to worry about their Honest Isaac Risk Model, or TransUnion want to serenade you with their flamboyantly named Empirica, the names mean NOTHING. All the major credit agencies use exactly the same formulas for deriving credit scores.

2.  Paying Off Your Debts Will Put Your Credit Score Back At Neutral
NOT TRUE. Your history will always have an influence on your credit score regardless of your current amount of debt.You can organise and pay off all your debts in one payment, but the fact you got yourself into debt in the first place will have an effect on your score. Paying off your debt is undoubtedly a good thing, and any pay off of debt will be reflected positively in your credit score, but it’s not a life-long fix.

3. Closing Old Bank Accounts Will Help
Some people believe that closing old accounts will have a positive improvement on your credit score. In fact, the total opposite happens! It’s true that managing multiple bank accounts can have a negative impact on your credit score, because typically scores are influenced by affected the total credit available between all accounts. Closing an old account will have no impact at all, as your bad credit will have already been accrued.

4. Loan Inquiries Hurt Your Credit Score
Don’t worry about shopping around for the best loan deal. Just make sure that you shop for loans all within the same month. Typically, all loan shopping queries made within a forty five day period will be treated as one loan application. Though your credit score will drop, it is not true that your credit score will continuously drop per enquiry. Try and get your business done quickly and efficiently and you won’t suffer multiple times.

5.  I Can Pay A Company To Fix My Credit Score
Umm, nope, you can’t. Credit agencies can do sweet F.A. to improve your credit score. The only person who can improve your credit score is you, is by paying off your debts and handling your finances better in the future. Though some credit agencies will seemingly offer a service which encourages you to pay them to help improve your credit, they will simply take a look at your history and make recommendations based on the 1001 credit advice articles you read on the internet. Time is money, so save it and invest it in your future credit rebuilding.

Jason Ward specialises in UK credit card information and advice, finance mythbusting and spends a lot of time failing to follow his own advice.

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