Not True. Your age and income is not factored in your overall credit score. However, the longer you have credit history in your name, the better it is for your overall credit score as this affects the ‘average age of credit history’ for your credit files. But your age, on its own, does not matter.
For example, someone 60 years old who has only 15 years of credit history will have a higher score than someone who's 25 years old and just opened a credit card. In fact, the person with the longer credit history, with all other factors being equal, would presumably have the higher credit score. Keep in mind that the length of your credit history is equal to 15% of your credit score.
Not true. Unfortunately, there always seems to be some misunderstanding around this concept so let me make it simple. There is a hard inquiry and there is a soft inquiry.
If a creditor or lender checks your credit, you are giving them permission to pull your credit file as part of evaluating your credit worthiness. This is considered a hard inquiry and it does show up on your credit file. This can have a negative impact on your credit score. When you check your own credit, this is referred to as a soft inquiry and it does not impact your credit score at all.
Bottom line: You can check your score as often as you like, and never have to worry that it affects your credit score!
Not True. Your salary is not calculated in the factors that make up your credit scores. However, when applying for credit, most lenders want to know your salary to determine your debt to income ratio. This is a measure that allows them to determine whether you can handle the current debt balances you have plus whatever credit limit they might consider approving for you based on a new application.
Not true. When someone else helps you qualify for new credit by cosigning, you are essentially taking a risk with that cosigner never missing a payment on your obligation. If he/she doesn't make payments, then your credit pays the consequences.
Not True. When you settle or pay off a delinquent or collection account, it actually does not improve your credit score. The only thing that changes is that the account goes from 'delinquent or unpaid to paid'. Unfortunately, the item still affects your credit adversely.
Not True. Opening or applying for new credit card only accounts for 10% of your credit score. So applying for new credit has very little impact on your credit scores. Of course, that does not mean you should go out and apply for 5 credit accounts in 1 day, as that would not be prudent.
Not True. When you increase your credit limit on a credit card account, you accomplish 2 things: you lower your utilization not only on that account, but you're also adding that new credit amount to your overall total credit on your credit profile, thus lowering your overall utilization across all credit accounts. As a result, this raises your overall credit scores, period!
Not true. This is true in a small number of cases. If you recall, you want to keep your debt to credit ratio (balances) on your credit cards below 30% of their respective credit limits. Therefore, if you close an account, you now remove the associated credit line from being calculated in the overall total credit on your credit file. Thus, you raise your utilization and lower your credit scores.
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Not true. Some employers may want to conduct a credit background check as part of their application process. However, they first need your permission to do so. They do this often times to see patterns of behavior such as the applicant’s ability to pay his/her obligations on time. However, they only have the ability to view your credit files, not your credit scores!
Not true. The logic behind people stating, ‘its not a good idea to pay off your balance every month’ is based on the concept of utilization. Utilization simply means how much of your credit line you are using on your credit account. The assumption is that if you leave a balance on your credit account, it shows utilization and also helps in the calculation of your credit scores. This is true to a small degree.
While "carrying a balance" does show activity, it directly affects your debt to credit ratio, which directly affects your credit scores. Your debt to credit ratio comprises 30% of your credit score so the lower your debt (balance) level, the lower your ratio will be and, ultimately, the better for your credit score.
Your credit is one of the most important financial assets you have, as it directly impacts your ability to apply for credit, obtain an apartment, open a bank account, obtain insurance, seek employment and so on. That is why we pride ourselves and our process on 'education'. One of the biggest compliments we receive from our clients on a regular basis is how committed we are in educating them in all aspects of their credit profiles.
Unfortunately, the majority of consumers lack knowledge about the various factors and moving parts to their credit files and credit scores. To make matters worse, with this lack of knowledge generally comes fear with most consumers being afraid that they can't accomplish certain goals based on the what ‘they think they know’ about credit files and scores. Lastly, with all the financial illiteracy in schools, media and online, many consumers get lost in figuring out what is ‘FACT vs MYTH’.