Every time you turn on the TV or log onto
the Internet, you hear about the perils of credit scores. But, what
is fact and what is fiction? Here are a few pointers to help you
out.
Myth or Fact?
1) Checking your credit report can actually hurt your credit.
Myth! That's a commonly held, but incorrect assumption. Personal or
"soft" inquiries are not included in credit score calculations.
So go ahead and check your report -- you won't be lowering your
score.
2) Scores are only used by lenders and creditors.
Myth! Prospective employers, landlords, insurance underwriters as well as others who grant credit, may all acquire your credit report.
That's why it's so important for you to check your report at least once a year for mistakes or misrepresentations that could potentially ruin your credit rating. By checking your credit report regularly, you can also spot any attempts at identity theft, and monitor your debt management.
3) Too many inquiries may hurt your credit score.
Fact! Every time you apply for new credit, the company checks your report, adding an inquiry to your credit file. Too many inquiries can be seen as indication that you have had trouble getting new credit, or that you are overextending yourself. Accounts that are older show your established history with credit, so think twice before closing them.
4) Small business owners can use personal
information to apply for loans without risk.
Myth! It's a mistake that many business owners make. When you use personal information to apply for business credit, leases, or loans, you double the number of inquiries made to your personal credit profile, and risk having a lower personal credit score. Also, by using your personal credit history to get business credit, you're not able to build your business credit score, which could help in the future.
5) "Credit repair" clinics can fix my credit.
Fact, but... You don't need them. You can do what these clinics do yourself at no cost. Here’s an in-depth look at self help credit repair from the Federal Trade Commission: http://www.ftc.gov/bcp/conline/pubs/credit/repair.htm
6) My credit score is the same no matter which
credit bureau I check.
Myth! Because the three major credit bureaus, Equifax, Experian, and
TransUnion, work independently of each other, information may be
recorded differently, and that may affect your credit score. Thanks
to a new federal law, you will be able to access one free credit
report a year from each company. Eligibility for the reports is
being phased in by state throughout 2005. To find out when a free
credit report becomes available in your state, visit the Federal
Trade Commission's Web site www.ftc.gov.
