Credit Bazaar is here to dispel all your myths related to credit score so that you can focus entirely on improving your credit score. There are various misleading agencies too that provide false information about credit score and also hoax the clients by taking money for increasing it. We are here to bust all these myths! The following are the 14 myths that are generally believed for credit scores:
- Dreaded seven years for improving credit!: It is widely believed that it takes seven years for negative information to stay on your credit report. However, it is not exactly that as with time, when the negative information ages, the credit score is impacted less than before. If you keep a reasonable amount of debt going forward and make timely payments, you can improve your credit score even before the negative accounts fall off.
- Checking your credit report again and again might lower your score: Well, this is an utter myth! It is your credit report and how many ever times you check your score; it is not going to hurt your score at all. Actually, you can check it as many times as you want, provided you are not using mortgage lenders and credit scoring services for checking your credit score. Because if several lenders are enquiring about your credit details within a short period of time, it could give a wrong impression to the potential lender and also hurt your credit score at the same time. Overall, for your personal viewing, it is a good habit to keep track of your credit score and report at regular time intervals, say once every three to six months. This will give you a good reality check and provide you ample scope and time for improving your financial behavior if required.
- No credit will be approved as you have a bad credit: People usually believe that if you have a bad credit score, you will never ever be approved of anything. It is sure that it will be difficult and harder for you to get credit approved, however, it is not impossible as it is not the whole and sole factor that is considered by lenders and creditors for evaluating your creditworthiness. The level of debt and income also are significant factors that play a role in this evaluation. So, even with a bad credit score, you can be approved, just that you have to pay a higher rate of interest.
- Get married and your credit scores are merged! : Well, you cannot marry somebody based on their credit score and you do not have to, as it does not merge once you’re married. It does not matter at all that you are married or not because the credit score is evaluated on the financial behavior of a person. Even having a joint bank account will not change a thing relating to your credit score and credit history. This means that you can marry anybody irrespective of their credit score as it is not going to change yours. Similarly, their credit score is not going to change because of your score.
- It is possible to access your lender’s credit report: The credit report that you get is not the same as what your lender gets. The belief that both of you will get the same report about your financial behavior is a myth. This is because a credit rating bureau offers a credit reports’ detailed version to the vendor. On the other hand, the credit report provided to you by the bureau will be very concise and crisp, where only the specifics that you need to see will be given, whether it is a paid copy or a free copy.
- Want to increase your credit score? Dispute information on your credit report: It is possible to dispute any information that you find incorrect on your credit report and request the company for a correction. But the important thing is that not all these disputes raised by you will impact your credit score, so don’t think that taking such steps can make your score higher. Disputes can be of many kinds such as an error in the date of birth, contact details, name, bank account details, and a transaction that has not taken place is included in your report. For other issues relating to bank transactions and accounts, the credit rating bureaus will contact the respective lenders for getting accurate information. If the lender does not accept the change that is requested by you, the credit bureau will inform you about this and wrap up your application by making no changes in your credit report. So, again this will not change your score. Therefore, all the disputes do not have the power to increase your credit score.
- The score completely depends on what you earn annually! : Completely false. A credit score does not depend on what you earn in a year. Even if you have an annual income of Rs.5 lakhs, you can have a power-packed score of 816. Whereas, it is possible that a person actually does not have a credit score at all if he has Rs.10 lakh annual income. Basically, credit score depends upon the number of credit lines the person has and how nicely he/she is managing it. Considering the case of annual Rs.10 lakh income, if you have never ever taken a loan or used a credit card so far, then you might have no credit score whatsoever. On the other hand, you may have an income of Rs.5 lakhs annually and a very well maintained credit card. This can result in a high credit score such as 816.
- Erase the transactions from the credit report by paying off debts: This is truly a misconception that paying a debt off will eliminate the entry of the same from your credit history. The evidence of every debt will be represented on your credit history for years to come and thus, impact your credit availability and credit score thereby. Such debt entries in your credit history will portray that you have managed your arrears in a responsible manner and have successfully paid them off. This will provide reassurance to any potential lenders, therefore, putting forward a good word about you. On the contrary, some missed payments and defaulting registered can notify your lenders about your finance handling abilities and halt them from approving your loan or credit application. Though it will improve over time depending on better credit performances, however, bankruptcy information can stay for as long as 10 years and negative information can stay on your report for up to seven years.
- Credit reporting agencies can improve your credit score: There might be various credit repair bureaus that might boast about increasing your low credit score. If the brand of these agencies is well-known, then people might trust them for companies that can repair their low credit scores and build them up to a high score instantly by spending money. Though it does not work in such a way as a matter of fact. The maximum a credit repairing agency can do is to file disputes on your behalf with a credit rating agency, provided you find relevant errors on your report. The error can be anything right from a fault in your name to a blunder in a transaction registered under your name in the credit report. If you do not have the required knowledge and time as to how one could dispute the errors, the credit repair bureau can assist you by doing the same on your behalf.
- Use debit cards for building credit score: Debit cards are named ‘debit’ for a reason, as they do not at all contribute to getting a ‘credit’ score or building your ‘credit’ history, as a matter of fact. Meanwhile, a debit card is an instrument for accessing your savings account balance and under no chances, does it cover the concept of ‘credit’. Hence, any debit card transactions will not change the value of your credit score or build your credit history for that matter. For opening the quota of your credit history, you must avail of a loan or a credit card. Your credit score will be generated when your credit history is built. Although, it will not be presented instantly as it will take a few months’ time to change from NA to a valid score.
- There exists only one single credit score: This is completely false that there is only one credit scoring method that applies to all the people in each and every situation. Now for your information, to be specific, there are more than a thousand models for credit scoring that are used in the credit marketplace at the given moment. Hence, one particular consumer can numerous credit scores. Every lender will check your credit score for varied reasons and every formula looks at your credit history in a diverse manner, providing different weights to varied aspects.
- Credit agencies are good or bad? : The credit agencies collect information and data about your debts and utilize this information for assigning you a credit score. These scores cannot be objectified as bad or good. They just quantitatively measure your risk. It depends upon the lenders who decide that a given score is meeting their specific criteria or not. Then they decide if they want to extend credit to the customers. Moreover, a credit score is just one of the factors contributing to their decision-making. This means that a good score will not make much of a difference if you do not have a fixed job or any other assets. Similarly, a really good income and a heap of gold bars can outweigh a bag score any day.
- Pay somebody to fix your credit: If you have a long credit history of making late payments always and do not practice good credit and financial management, then there is no magic lamp available for removing accurate information from your credit report on your special demand or by bribing any officials. While there are various credit repair services all over social media and on the web, as a matter of fact, they do nothing that you cannot do on your own. The most significant method for repairing your credit is to practice healthy credit management techniques. This refers to paying your credit accounts and credit cards timely. It also means that you understand how the credit scores work and the factors that go into your credit score.
- Close the credit card accounts for good credit score: It is actually the other way round. Closing your credit card accounts would actually decrease your score because it will negatively impact your credit utilization ratio. And this ratio is a key part of your credit score puzzle. Primarily, credit utilization calculates the balances that you owe on your credit cards in relation to the credit limits of the cards. Credit utilization ratio can be measured for every credit card and also on an overall basis. It is actually a better idea to pay off the balance on a card for improving your ratio calculation. So, just focus on keeping the card open for maintaining the total limit, thus lessening your credit utilization ratio. The prime point here is that closing will hurt and help build your credit score because it lessens the amount of credit available. However, in case if there is an annual fee on your card, you can pay the remaining balance and close your account. But this is in some exceptional cases while just blindly closing your credit card accounts can just reduce your credit history altogether. Scoring models usually reward a history that is responsible and lengthy, so it is beneficial to keep a long-standing card open. The average age of your accounts is reduced, therefore curbing your credit score too.
Conclusion: Don’t forget that it might take a significant while to improve your credit score. Kickstart your path to healthy credit by establishing good credit habits that will reflect in your score in the future. We, at Credit Bazaar, believe in breaking the myths and our professionals are here to guide you with appropriate steps that can help you to increase your credit score, with proper methods.
For any queries regarding Credit Score improvement or Loan contact Credit Bazaar CR Arcade 2nd Floor, Opposite Delta Garden, Next to Shree Mahalaxmi Restaurant, Mira Road East, Thane: 401107