5 Myths And Facts About Credit Scores

You might have conveniently overlooked the three-digit number that rules over your wallet, but the indubitable fact remains that your credit score plays a crucial role in your life deciding a number of things- the amount you pay for mortgage or car loan, the interest rates and so on. The score depicts your credit-worthiness or your capability to pay back loans responsibly and without faltering and hence, knowing some facts about this score is imperative to stave off from blemishing it unknowingly.

Myth 1: Credit Score is the only determinant of whether one gets credit

Fact: While credit score is truly something which credit lenders look into while approving loans, it is but only one of the determinants. There are several other things which are taken into consideration as well such as the amount of existing debts, the amount of additional debt that you can manage comfortably with your income as well as the particular underwriting policies of the organization.

Myth 2: Dealing with Cash-Only purchases will help get a good score

Fact: A good credit score is a reflector of your credit history which in turn looks into how you make responsible use of the credit that is available to you. If you choose to make only cash purchases and do not apply for credit anytime you would not have any credit history and your score will be comparatively lower than one who has credit and yet shows a record of consistent and regular on-time payments.

Myth 3: Too many cards affect your score negatively

Fact: Contrary to what it was believed previously credit connoisseurs now state that having a number of cards is an indication of your credit handling capacity which you have done satisfactorily and responsibly for which so many lenders could entrust you with cards after reviewing your past payment records.

Myth 4: Credit Bureaus are always right when determining scores

Fact: A study by the U.S. Public Interest Research Groups almost 8 out 10 credit reports issued by Credit Bureau possess some serious mistakes which can affect one’s scores negatively. Hence, it is important to examine reports from time to time and get the errors rectified as soon as possible.

Myth 5: Checking your credit history affects your score

Fact: While multiple queries done on one credit history can be an indication of your inclination to shoulder more debts, FICO also considers that some consumers may simply be researching for the best rates available in the market and hence approaching various lenders who will consequently carry out checks individually. If all the check requests have been done within a two-week time frame it will not affect your score negatively as it would be seen as a single inquiry.

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