Mike Alea, of FBC Mortgage, sent out an email on a topic that I found interesting and believe that most people have been misinformed about. I thought I’d share it with you:
9 Credit Score Myths That Do You More Harm Than Good
- Closing out old, active accounts will help your score. Your credit score is based on your length of credit history and utilization rate. By closing old accounts, you can make your credit history appear shorter and as a result actually decrease your score. It can also reduce the total amount of available credit, which can also affect your score.
- Opening (but not using accounts) will help your score. Your credit score is affected by how well you manage the credit you do have over a period of time, not by how many credit cards you have with available balances.
- You should avoid using your credit cards at all. If you’re not using your credit, you’re not building credit history. Use your credit cards from time to time and promptly pay off the balance.
- Dispute letters can clean up your bad record. Dispute letters may force the removal of negative items temporarily, but once the lender can prove the records accuracy, it will reappear on your credit.
- Paying off old debts and judgments will help your score. Don’t expect a “negative” to disappear by paying it off. Negative records remain on your credit for 7-10 years, regardless of any remedies you made.
- Credit inquiries hurt your score. Inquiries alone do not make a big enough change in your credit score to make a difference when it comes to lenders.
- Using a credit counseling service lowers your score. Credit counseling services no longer figure into the FICO scoring system. So although your report might indicate you are receiving credit counseling, using those services won’t lower your score.
- There’s a set formula for obtaining great credit. Credit is a very individual thing. Credit scores look at everything and take it all into account.
- You can get a perfect score. Getting a perfect 850 is nearly impossible. Your credit score is a reflection of your credit risk and regardless of your credit history, there is always a risk.
For any credit or Mortgage loan questions, please contact Mike Alea, contact info below.
Michael Alea, NMLS# 181045
Market Manager, Mortgage Loan Originator
Follow Mike on Twitter @beach_lender
Credit score scrabble picture: http://suitproject.net/how-to-check-your-credit-score-for-free/