The Top 5 Credit Mistakes

The Top 5 Credit Mistakes
If you're looking to improve your credit, you've probably
heard a million suggestions on how to go about it. Some
advice may be right, but a lot may be wrong. What should
you believe?

I'm here to help clear up the confusion. Below are five of
the most common misconceptions about credit. Get to know
the facts, and it'll be a lot easier to keep your credit
happy and healthy. So, the top five credit misconceptions
are...

#5: Closing old accounts will improve your credit score Not
true. The key word here is "old." When you close old
accounts, you shorten your credit history. And that can
actually lower your credit score. If you want to close your
accounts, be sure to start with the newer accounts first.
This will help keep your long established credit history on
your credit reports.

#4: Co-signing a loan doesn't make you responsible for the
account Wrong. If you open a joint account or co-sign a
loan, any activity on those accounts will show up on your
credit report. For example, if you co-sign a car loan for
your brother and he misses a payment, that will show up on
your credit report. Think of any joint account or co-signed
loans as your own account.

#3: Paying off a negative record will get it removed from
your credit report Not quite. Negative records such as
collection accounts, late payments and bankruptcies can
stay on your credit report for 7-10 years—even if you
pay it off. But let me point out that paying off your debts
is still a smart move because they will be marked as "paid"
on your credit report. Lenders may look more favorably on
your credit report if your debts are paid. Of course, the
big improvement will happen when the negative record
expires.

#2: Paying off a debt will make your credit score jump up
50 points right away This one's not true either. Here's
why: credit scores are calculated with so many different
factors and values that it's hard to say exactly how many
points you can gain—or lose—by doing one thing.
Every person's situation is different. The fact is, there's
no one quick fix to perk up your score. Instead, doing
things like paying on time...reducing your debts...and
making sure your credit report is accurate are the recipe
for a stronger credit score.

And the number one credit misconception is...

#1: Checking your credit reports will lower your credit
score Heck, no! Checking your credit reports on a regular
basis is one of the best ways to monitor your credit and
lessen the damage of identity theft. When you check your
own credit report, it won't affect your score. However, an
inquiry will appear when a lender or creditor looks at your
credit reports because you're applying for a loan or
credit. Keep those applications to a minimum and you'll be
in good shape.

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