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Credit Repair Services
There is a whole lot of misinformation and confusion out there about credit scoring. Most people do not have a clue about what does or does not hurt your credit scores. Unfortunately much of this information is coming from people who should know better like mortgage brokers and lenders. It is very imortant to get proper advice about how your credit score is calculated, the wrong advice could cost you thousands of dollars in the long tem by over paying in fees and interest. With that said, it is imperative that you know some of these credit scoring myths! Checking your FICO score can hurt your credit I have heard this from the people who think that by checking or applying for credit more that one time it will hurt your score. Most people are confused about which type of inquiries hurt your credit score and which don’t apply. Applying for credit is generally what will lower your score, ordering a copy of your own credit report or your own credit score does not lower it. Employment screenings won’t affect your credit score. Inquiries made by credit card lenders who are trying to decide if they want to offer you a pre approved credit card isn’t going to hurt or lower your score either (this is called a soft pull). If you decide to take them up on their pre-approved offer, when they pull your credit for real it will lower your score. One thing you can do to stop or minimize the damage is to make sure you shop for a mortgage or a car in a fairly short time frame, your FICO score treats multiple inquiries within 30 days as just one inquiry and ignores all the other inquiries made within the 30 days prior to the day the score is computed. As a general rule one inquiry will lower your score no more than five points. Where this can hurt is if you apply for several credit cards, a car loan, a mortgage and various finance companies, over a six month period. All the inquiries dropping your score by five points or so you can’t easily lower your score 50 or 60 points just by applying for credit. Credit counseling is treated much like a bankruptcy and will lower your score The current credit scoring model actually does not reference credit counseling in your file. For the last three years the FICO scoring system had noticed people getting credit counseling didn’t default on other debts more than anyone else, because of this they decided to take that off of their formula. With that said your ability to get a loan can be hurt by credit counseling, because your lenders included in the credit counseling, may actually be reporting you late. Many credit counselors also do not send your payments in on time and and this may hurt your credit score significantly because it will show up as multiple deliquencies. Some lenders will also consider credit counseling as a bad sign and can treat it like you filed for a Chapter 13 bankruptcy. A Chapter 13 bankruptcy requires a repayment plan and is looked at more favorably than filing a Chapter 7 bankruptcy, but it still may disqualify you from a loan with those lenders. If you plan on getting a mortgage loan you might want to steer clear of credit counseling. If you’re in trouble right now and your credit is suffering a good credit counseling agency might be able to help you get back on track by budgeting and lowering your payments. Close accounts to improve your credit score This is probably one of the biggest misconceptions out there. Closing accounts can never help your credit score and ultimately it may hurt it. While it is true that having too many open accounts can lower your score and if you have those accounts already open, the damage is done. You can’t repair that damage by closing the account and you could really make things worse. Your credit score looks at your available or high credit limit and watches your balances. By shutting down many accounts, your total available credit can be too low and you will look like you have maxed out your credit.By making your balances look much worse it will drive down your credit score. Another key component to credit scoring is how long or the length of your credit history. It’s possible that you may have a very old account that you do not use very often that is improving your score because of its long History, if you close this account, it makes your credit history look younger.What I believe people are trying to say is by paying down your credit card debt you actually have more credit available which can improve your score. Don’t close out an account that you have paid down to zero as it may have negative consequences. When deciding what to do or whose advice to listen to remember that people in certain industries may not actually know what is best for you. I recommend doing your research and looking for an expert who does this every day. They likely will be keeping up to date with the constant changes. I have completed a FREE small ebook on Credit Scoring.
To download it go to http://www.creditdebtexpert.com/credit-debt-optin.html
David Forer has been working and writing in the fields of credit and debt for 15 years and offers online coaching to those who need it most. |
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