Posts Tagged ‘credit score misconceptions’

Two Most Dangerous Misconceptions About Good And Bad Credit Score

If you do not want to invite problems with insurers, landlords, lenders and others, you must learn how to distinguish between what is fact and what is fiction about good and bad credit score. Your credit score plays a crucial role in many circumstances, such as when a landlord has to determine whether they should accept you as a tenant or not, when your utility service providers have to determine whether you should be asked to make a certain amount of deposit in advance and how much, when cell phone companies receive your application for a new connection and they have to determine whether the connection should be provided to you and on what terms, when insurance companies have to decide the amount of premium on your policies, and when lenders have to determine your eligibility for a specific loan program or credit cards and how much interest rate they should charge. As you can see, it is your FICO score that determines how smooth or difficult your financial life is going to be. Therefore, get your facts right about your credit score. Following are the five most dangerous misconceptions.

“Reviewing Your Credit Report Affects Your Credit Score Negatively”

It is mainly because of this common myth about good and bad credit score why majority of people hesitate in obtaining their credit reports and reviewing the details on the same, let alone filing a dispute for any mistakes that might be there on the reports. The fact is your score does not get affected if you check your own credit report or if you file a dispute with the credit bureau to make some corrections on certain entries on it. But yes, if you are asking a car dealership or even a friend to pull your report, it will definitely have some negative outcomes, as inquiries made by a third party are considered as “hard” inquiries. On the other hand, if you do not check even your own credit reports, you will never get to know what is happening with your credit score. Sometimes, you may even be turned down for a loan or you may be asked to pay a much higher premium on your insurance policies just because of certain errors on your reports. Unless you find out those serious errors and get the same rectified, you will keep paying for it. Always remember, your unawareness can prove to be a very costly affair for you. You are strongly recommended to review your credit reports at least once in every 12-month period (better, if you do it every six months). As per the laws, you are entitled to get one , at least once every year.

“Showing Some Financial Responsibility Will Improve Your Score Automatically”

Another common myth about good and bad credit score is that your score will automatically keep on improving if you just start handling your finances more responsibly. Though having financial discipline is a great thing, yet it is very important for you to keep in mind that it May Or May Not help in automatically. Whether your score increases or not will depend on whether the financial activities (which according to you are good) you are involved in are suitable for the credit scoring formulas. If the formulas do not like those activities, you may end up hurting your own score. For example, if you max out your cards and pay them in full, shut down a bunch of cards within a very short span of time, or start using only one card – all these activities that seem to be good are likely to affect your score negatively. In brief, it is important to note that any activity that seems great for your wallet may not necessarily be great for your credit score. Remember, the score does not measure how financial savvy you are or how much assets or income you have. The score is more about how you handle your credit so that the prospective lenders, landlords, insurers, or other parties could determine whether you are likely to pay your debts and bills in a timely manner or not.

Overall, these two myths about good and bad credit score need to be dispelled because otherwise they can prove to be very dangerous for your financial life.

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