There is a lot of bad information out there
about credit scores and FICO and it can be really confusing. Whether or
not this bad information comes from a lending agency or your best
friend, you can be the one to pay the cost.
FICO score ratings are usually used for
mortgage lenders. These ratings can either hurt or help your credit
score. Often, there are many misguided tips to credit scores and
reports. Read on to learn a few.
One of the most common fabrications is that
when you check your credit score it will hurt you. When you do the
checking yourself, it is considered a soft inquiry and does not do any
damage to your score. On the other hand, if a lender or credit company
checks your report, it is regarded as a hard inquiry. Hard inquiries
normally cut 5 points away from your score.
If multiple inquiries are made within a
14-day period, it is considered as one inquiry. The credit score rating
system also ignores all inquiries that were made 30 days prior to the
pulled credit score.
Another untruth about credit reports is that
if you close old accounts you will improve your credit report score.
Surprisingly, doing so will have the opposite effect with the way the
most recent credit score rating system works. Don’t listen to
a lender if they tell you to close an old account.
The same goes for canceling credit cards
that you aren’t using. This can lower your credit score
because it makes your history appear shorter. Close newer accounts
instead if you want to reduce your levels of available credit. You may
want to consider applying for a new credit card because it also lowers
your score.
You don’t need to check credit
score ratings other than FICO. If you have heard the
opposite, bear in
mind that this is a red flag. All of the national credit reporting
agencies offer score ratings using the Fair, Isaac formula known as the
Fair Credit Reporting Act.
Each of the agencies can provide you with a
FICO score even though your score may be called something different by
each company. Equifax calls their FICO score rating “Beacon
Credit Score,” TransUnion calls theirs,
“Empirica,” and Experian calls theirs,
“Experian/Fair, Isaac Risk Model.”
Your score may be different at each of these
companies, so when you check credit score make sure your information is
correct that you only get a report from one of these three companies.
It is a good idea to glance over a report from each company before
applying for any new loans.
Another myth is that credit counseling will
damage your score. Under the current rating system, this information
does not go into your file. It may affect though who is willing to work
with you if you are applying for a new loan because you may be
considered a risk.
If you want to maintain a good credit score,
pay your bills on time and eliminate debt. You should also check credit
score and reports for any errors. Make sure you follow these words of
advice so you don’t become a victim to some of those
misguided tips out there.