Critical Credit Myths
Everyone knows that having a good credit score marks you as a credit-worthy individual with increased buying power. But, said consumer finance consultant Jill Krasny, many people have critical misconceptions about what makes for a good credit score.
Krasny offers five common credit misconceptions:
- Having too much available credit can hurt your score – False. There is nothing in the credit scoring formula that penalizes a consumer for having too much available credit. If anything, it may increase your credit worthiness in the eye of lenders, who operate on the theory that having a lot of credit available but low balances and on-time payments make you the best possible risk.
- Income is part of your credit score – Wrong. Credit reporting agencies do not even include your income on your report. Lenders are interested only in whether your pay your bills on time.
- Once married, a couple’s credit score is combined – Wrong again. All consumers, married or not, have individual credit files and scores. But it is important to manage your finances carefully, especially when it comes to shared debts.
- Carrying balances on credit cards is better for your score – Not. The only thing a running balance will get you is interest charges. Paying off your bill on time each month shows credit activity as well as credit worthiness.
- A credit repair agency can get negatives off your report – False. If late payments are listed accurately on your credit report, no agency can legally remove them, no matter what they promise. If the information is correct, the only thing you can do is make on-time payments going forward. If the information is not accurate, you should file a dispute with the credit reporting agency, asking them to correct the inaccurate information or remove the negative info that doesn’t belong to you – which credit agencies are obligated to do within 30 days under the Fair Credit Reporting Act.
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