Google “credit score” and you’ll probably get a bazillion results. For something as important as your credit, there is so much information out there that it can be very difficult to sort through what’s fact and what’s fiction. A recent Quizzle article broke down some of these common credit myths. Here’s a few of them:
- The Rich Have the Highest Credit Score – The more money you make, the higher your credit score, right? Wrong! Your income has nothing to do with your credit score. Your credit score is a reflection of your ability to pay your bills on time.
- If You Settle a Debt it Disappears off your Credit Report – Sorry, but this isn’t true. “Negative” information like a late payment, settlement or other dings to your credit can stay for up to seven years. Bankruptcies stay longer, up to 10 years. While they stay on your report, their impact on your credit rating is reduced as time goes on and as “positive” actions out-number them. So keep paying your bills on time and eventually the impact of “negative infractions” will be lessened.
- Credit Bureaus Have Your Exact Information – In fact, most credit reports contain some type of error or mistake. As many as eight in ten of us have a serious reporting error on our credit reports, that’s why it is so important to check your credit report often and to dispute any errors right away. You can check your credit for free once a year from each of the three major credit reporting agencies, Equifax, Experian and Transunion.
- Paying Cash All the Time Boosts your Credit Score – You have to use credit (and pay it back on time) for your score to improve. If you don’t have any credit cards or loans, nothing gets reported to the credit bureaus, so they have no way of judging your ability to repay debt.
- Your Credit Score is your Credit Report (or vice versa) – Your credit report is a listing of various lines of credit in your name along with a history of your repayment of those lines of credit. Your score is a calculation of a handful or so of factors that credit bureaus use to represent your likelihood of repayment of credit. Each bureau has its own way of reporting and its own way of coming up with a credit score.
The bottom line: Pay your bills on time, use credit wisely and check your credit report at least three times per year.