3 Credit Score Myths

The credit score a certain persona is indicative of his financial standing. Many agencies, on a regular basis, look at your credit score, from banks, credit unions, utility firms, landlords, insurers and even employers.

Myth 1

The Major Credit Bureaus Make Use Of Various Formulas In Coming Up With A Credit Score

This is considered to be the most common among all. Truth of the matter is, the major credit bureaus, from Experian, Equifax to TransUnion have a different term for the same score. TransUnion, say, calls it the Empirica, while Experian calls it the Experian/Honest Isaac Risk Model. They may have different names for the credit score, but they make use of the same formula in computing it. While the names used by the major credit companies are essentially the same, lenders often use just one credit report, to analyze your loan application.

Myth 2

Merely Paying Off All Your Debts Will Instantly Repair Your Credit Score

Your credit score will always be affected by your past credit history, and it’s not about your present debt. You can quickly pay off your credit card debts and settle any other outstanding obligations, but our previous history of late or missed payments will still reflect on your score.

Myth 3

Closing Old Accounts Helps Boost Your Credit Report

This is delusional. Closing old accounts will never have an impact on your credit score, but opening these old accounts will surely hurt your score. Having too many accounts also incurs damage to your credit score, because your score is typically affected by the difference between the available credit and the credit being used. Closing an old account will make your credit report look new, but the damage is done.