Credit Repair

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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Posted in Credit Repair, Credit Score | 4 Comments »

4 Responses to “Two Most Dangerous Misconceptions About Good And Bad Credit Score”

  1. jasmine says:

    Its very practical and explained in simplified manner for layman like us who are not bankers. In fact the credit score matters much in our day to day’s life weather we are buying car or looking ahead for finalize the suitable house for us.
    We should never get our FICO score checked through any financial institution or any bank as may give the impression that we have approached number of places for applying any loan and the same is not entertained. Instead we should check our FICO score by ourselves through the website, which would have no impact on our FICO score and we will also become aware about any missed or delayed payments, which can hen be taken care of to affect our FICO score. We may feel proud by the number of credit cards we hold in our wallet but we forget that by doing so we are inviting more problems as we need to become more cautious regarding payment dates of the cards failing which may spoil our credit history that too without any mal intention in mind. So let us not get prey without any fault of ours and let it affect our daily lives. Henceforth a stitch in time save nine goes to be a wise saying. Happy shopping !!

  2. michael says:

    A good credit score is very important in every aspect of life. This article can tell us about the myths related to a good or bad credit score. Today the companies can deny your appointment on the basis of bad credit score. It is very easy to maintain the credit score. It is very wisely said in the article to review your credit report at least twice in a year. It will tell you about any wrong entry and you can try to make it correct otherwise it will affect your score. Financial discipline is important to get a good score but do it sensibly. I want a good credit score. I have to use my credit cards because 30% of the score depends upon its utilization. But use it in a suitable manner and the most important thing always be punctual for the repayment of all your bills. This is the thing which affects your credit score at most. With the help of this article, any body can know the way of getting good credit score without any confusion.

  3. tom says:

    There are so many banks who offer their credit cards to student at college level. They offer them in such a good presentation a lot of goodies so that the student attract towards it. Since the student doesn’t have any idea about the personal finance management or credit history. Because they are in the begning of their carrier. The students think so many misconceptions about the credit cards. Some students think that caring so many credit cards is a status symbol but it can affect the carrier in the long run. Even if a student has a good financial strength then carries only one credit card at a time. If you have so many credit cards then it is very difficult to maintain it and is a result a penalties and fees will be charged after a specified time period. Some students think that paying the minimum balance is a good financial management but this is a very costlier decision. The companies will not reduce your penalties because you are a student. So don’t take any decision or conclusion before reading the terms and conditions of the banks. Since the students are not aware about the details of financial transactions and they give the personal information to the company as they think that the company will not leak the personal information and the risk of identify theft is very less. But this is not true, there may be a leakage so be careful while giving the personal details because the identify theft may damage the credit score.

  4. abel says:

    There are high risks for the people who have bad credit. When you facing the bad credit then it would be very difficult to convince the creditor that, since you have very bad credit history so it is not easy to pay the entire loan in one amount. But some banks or financial institutions are ready to take the risk from the people who have bad credit history by applying some terms and conditions. If some one has the bad credit and if they want to improve it then they can take the loan once again and pay them on time .This will not only increase the credit score but you can also gain the trust from the lenders. High risk loan are risk not only for creators abut for the borrower also. Borrower have a risk as this will be last chance to improve their credit where as the lender think whether the borrower will pay the amount on time or not. There is another policy that the bank adopted is they take very high rate of interest. The lenders will definitely get the financial gain but it will be the burden for the customer. So if you want to apply it then make sure that you will pay the amount on time. Go through with proper financial planning and management to pay the loan amount on time. Make a proper budget to save money. You should avoid your expenditure on traveling, good things, Hotels etc… Spend wisely. High risk loan are basically for the people who have filed bankruptcy before. If you in emergency then only apply for such type of loan.

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