Money Sense Tips

Most individuals who own credit cards annually check their credit scores with the three agencies; Equifax, Experian, and TransUnion.  While these scores are important in obtaining credit, loans, and lower interest rates, there seems to be several credit score myths that need to be debunked.

Myth:  There is only one credit score.
Fact:  There are three credit scores; one from each of the aforementioned agencies.  Read The Main Credit Bureaus

Myth:  Your score will decrease every time you check it.
Fact:  Not true.  You can ascertain what your score is as often as you need to and it will not lower your score at all.

Myth:  The FICO score is determined by income, age, and gender.
Fact:  False.  Your score is determined by many factors, none of which include the above.

Myth:  The more money I have, the higher my score will be.
Fact:  Untrue.  The score is based on payments made on time, and keeping your debt under 75% of the credit available.

Myth:  Credit repair organizations can remove information on your credit report that is unfavorable and thus increase your score.
Fact:  False.  If you find inaccuracies on your credit report, you can easily dispute them by writing to each agency individually.  However, it will not increase your score.

Myth:  The more credit card applications received, the lower the score.
Fact:  Untrue.  While we are flooded with these applications in the mail, if you don’t apply, your score is untouched.  It is only when you do apply, and wind up with many high-balanced credit cards that are in use, that your score may be lowered.

Myth:  Scores will rise if credit card accounts are cancelled.
Fact:  False.  The truth is that it is better to keep a long-existing credit card account even though you may not use it.  It has a history attached to it; the number of years you’ve had it, used it, and maintained steady on-time payments.  This is the card that gave you a high score to begin with.  To cancel out an account would defeat the purpose of maintaining a high credit score.

Myth:  Applying for a new credit card to pay other credit cards raises the score.
Fact:  Absolutely untrue. Keep in mind; if you own $5,000 and you apply for another credit card to pay the $5,000 off, you are still in debt for $5,000.

Myth:  Having no credit cards is a good thing.
Fact:  Wrong.  At some point in your life, you will need to establish a credit card history.  It’s a catch-22 situation.  Without a credit card, you cannot create a credit history, you cannot finance a car, home, or other tangibles you wish to own.  Credit history is essential in obtaining high credit scores.

Owning a credit card and working to obtain a high credit score will serve you well, as long as you do not incur expenses above your means.  Pay on time and/or pay off balances when you can; stay within the 75% of available credit and over time, your credit score will work well for you.