The Facts And Fiction Of Your Credit Score
Your credit score has a huge impact on your personal and professional life.
This rating of our financial trustworthiness is used to determine the interest rate you pay on debt, the dollar amount you can borrow- and, in some cases, whether or not you’re able to get a specific type of job.
There are a number of misconceptions about credit scores and how they are determined. If you’re not clear on how the process works, you can’t take steps to improve your credit score. This article explains the myths and realities of your credit score.
The myth: Checking your credit report will hurt your credit score.
The reality: No, it won’t.
This is a common misconception, because people confuse applying for credit with checking their credit score. Your credit report is affected each time you apply for credit. However, the idea that checking your credit score will somehow harm your credit is simply not true, so feel free to check your score as often as you need to.
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The myth: Your credit score will be harmed if you have a criminal record
The reality: It’s… complicated.
Having a criminal record does not necessarily mean that your credit score, per se, will be impacted. However, a criminal record may make it difficult for you to obtain loans and credit cards due to other elements of a background check— so essentially, it has the same effect as it would if it directly impacted your credit score. If you have a criminal record, then you may want to consider expungement; you can learn more here to see if this might work for you. If you expunge your criminal record, your success rate with finance applications should improve.
The myth: You have a (singular) credit score.
The reality: You have a number of different credit scores.
It’s true; you do not have a single credit score that is used by all lending institutions . Different bureaus measure different factors, and weigh factors differently. If one credit bureau gives you a poor score, that’s not necessarily a need for panic; only when you see a consistently poor trend across numerous platforms should you seek to find ways to improve your credit score.
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The myth: Your credit score can be impacted by someone you live with
The reality: Yes, this can happen, particularly if you have a joint bank account.
Let’s say you live with your partner. Your credit score is good, and you’re careful with your finances. Your partner, however… not quite so much; their credit score is rather poor, and especially when compared to yours.
Unfortunately, due to a “financial link” existing between you, their poor credit score could impact yours. The best way to prevent this is to keep your finances totally separate; no joint bank account, no jointly owned credit card, nothing. This strategy will keep minimize the impact on your personal credit score.
What If Incorrect Data Is Reported?
If incorrect data is reported to a credit bureau, consumer protection laws require that a credit bureau must either correct the information or remove it, once supporting data is supplied. Removing incorrect data is important, so that your credit score in not damaged.
Assume, for example, that you have your car loan with Acme Bank, and Acme reports that your November car payment was 20 days late. You have bank statements that prove that the payment was debited out of your bank account on the due date. You can supply the payment information to the credit bureau, and they must remove the late payment report.
Also, keep in mind that lenders are not required to report everything that happens with your account- only that the information they report is accurate. If you pay off your car loan with Acme, for example, the bank may not report it right away. If they don’t, ask your bank to report that positive information to each credit bureau.
Stay Informed
By understanding the myths and realities of your credit score, you can approach borrowing decisions with the confidence and improve your personal finances.
This post is for educational purposes only.
Ken Boyd
Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies
Co-Founder: accountinged.com
(email) ken@stltest.net
(website and blog) https://www.accountingaccidentally.com/
(you tube channel) kenboydstl
Image: Credit Score, Investment Zen (CC by 2.0)