6 Things You Don’t Know About Credit That You Probably Should

A quarter of adult Americans don’t fully understand the topic of bad credit. The total adult population of the United States is slightly over 242.5 million people. That means that there are 60.5 million who are either uninformed or not informed enough to separate bad credit myths vs facts.

60.5 million people. That is a huge number. Although the topic can be an endless conversation, we really do believe that you being informed about what bad credit is can easily change your outlook on where you decide to shop for a car, what kind of loan to get into, or if the timing is right.

Six Bad Credit Myths

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I have to have debt to establish credit.
Myth:
Fact:
I have to have debt to establish credit.
Building your credit does begin with opening a loan or line of credit. But you do not have to be constantly in debt to build your credit. In fact, it will look a lot better to creditors and lenders if you’re able to pay off your balances (or keep them below 30% of their limits) each month.

Medical Debt doesn't affect my credit score.
Myth:
Fact:
Medical Debt doesn’t affect my credit score.
In the eyes of the credit bureaus, debt is debt. It’s important to pay off all your debt instead of being negligent and letting it get out of hand. Late payments and collections will be reported just as they would be for a loan or credit card.

Checking my credit report will damage my score.
Myth:
Fact:
Checking my credit report will damage my score.
When you request your credit report what is done is called a soft inquiry; it doesn’t have any effect on your history or score. You can check your credit report any number of times (once from each bureau for free) a year without any damage. Keep in mind that when a lender or creditor pulls your credit, though, it does have a small, but negative, effect on your score.

My Spouse and I share our credit score.
Myth:
Fact:
My Spouse and I share our credit score.
You may share last names, your house, and maybe even the car, but not your credit score. This myth comes from fact that shared credit cards and loans will equally affect both credit scores whether you pay on time or miss a payment no matter who is responsible for making the payments. Remember to check both people’s scores before applying for joint loans or credit cards.

Closing old credit accounts is good for my credit score.
Myth:
Fact:
Closing old credit accounts is good for my credit score.
Your accounts’ ages affect your credit score. The longer the better. Old accounts show you can maintain your credit and monthly payments. It leads creditors and lenders to believe you’re less likely to make mistakes that those new to credit may make.

Closing old credit accounts is good for my credit score.
Myth:
Fact:
Closing old credit accounts is good for my credit score.
Your accounts’ ages affect your credit score. The longer the better. Old accounts show you can maintain your credit and monthly payments. It leads creditors and lenders to believe you’re less likely to make mistakes that those new to credit may make.

Learning More Credit Facts

If you believed these myths, don’t feel so bad. Until recently, credit agencies have been vague at best as to how their own credit systems actually works. However, now that you know the truth from these myths, utilize what you’ve learned and take a step forward to establish great credit.

Fully understanding your credit and how the system works is a powerful thing to know when shopping around for big investments – especially if you need a bad credit auto loan. Until next Thursday, squash the myth with the power of knowledge!

Posted on September 4, 2014 by in Uncategorized
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