9 Myths About Credit Reports

Written by Alex Bach

For many consumers credit remains a somewhat mystical and mysterious entity.  We knows there’s a number calculated from a variety of sources; we know that the higher the number is, the better the credit.  But we’re still a little uncertain as to exactly how those numbers are generated and changed.  So let’s set the record straight.

Think you might have an error on your credit report?  Check out some of these most common credit repot errors and how to fix them.

9 De-Bunked Myths about Credit Reports

1. Checking Your Credit Score Automatically Lowers it: Only hard inquiries and applications for credit will actually bring your score down.  You as a consumer can check your own credit without any negative dings to your score. In fact, keeping track of your credit is healthy and one of the best ways to avoid fraud.

2. Bad Credit Is There to Stay: Credit scores fluctuate, and while a lower score might be harder to drive up, or take longer than you’d like, it is not permanently bad.

3. Low Limits Will Raise My Scores: Having low limits on your credit does not equate higher numbers. As the numbers gauge your ability to handle debt and repayment, having higher limits means higher trust and expectations–therefore higher credit score numbers.

4. Credit Bureaus are Government Owned: This is simply not true. The credit reporting bureaus are separate, privately held companies.  That we use the Big Three owes to the fact that they’ve been around for some time and have earned our trust.

5. Paying Off All My Debt Will Give Me a Perfect Score: This is only true if your first and only repayment in the history of your credit is the entirety of the balance. As the score is an accumulating history of your credit, it has to take in all transactions, not just the balance.

6. Cancelling Cards = Raised Score: This is a fallacy. As the credit score, again, gauges how you handle debt, having only one source of credit doesn’t signal that you are a master of credit.  Don’t go wild with cards, opening new accounts to drive up your score–that does look bad.

7. Credit Scores are Valid for Six Months: Your credit payments can change from month to month, and so can your score. Your credit score isn’t just a bundle calculation, it moves dynamically with your credit history. Every time someone pulls your score, it should reflect your most recent activity.

8. There Has to Be a Balance on Your Credit Card To Have Good Credit: Scores are tallied by what you payed, not what your balance is.  Unless you’re not making the minimum payments or are overextended, it doesn’t hurt your score to pay off your balance.

9. One Credit Scores is the Same As Another: Every Credit reporting score is a little different depending on the information made available to them.  Creditors have started giving information to the Big Three but sometimes minor info isn’t available or the agencies work at different speeds.