Top 5 Credit Misconceptions

Top 5 Credit Misconceptions

We have all heard the rumors...from neighbors, relatives, or friends. A wide variety of myths float around about what you should and shouldn't do to manage your credit. Credit Karma has exposed these urban legends to provide you and your informers with the truth about credit:

Your score will drop if you check your credit - Fortunately, this one is definitely not true. Checking your own report and score is counted as a "soft inquiry" and doesn't harm your credit at all. Only "hard inquiries" from a lender or creditor, made when you apply for credit, can bring your credit score down a few points. Worried about damaging your credit while shopping around for a loan? Multiple inquiries for the same purpose within a short amount of time (a few weeks) are grouped together into a less damaging period of inquiry.

Closing old accounts is a good idea - To close or not to close, that is the question. Many people advocate closing old and inactive accounts as a means of managing their credit. But they should think twice before closing the oldest account on their credit reports. Canceling old credit accounts can lower a credit score by making the credit history appear shorter. If you want to reduce your levels of available credit, ask for your credit limits to be lowered or close newer accounts instead.

Once you pay off a negative record, it is removed from your credit report - Negative records, such as accounts in collections, bankruptcies, and late payments will remain on your credit reports for 7-10 years. Paying off the account before the end of the set term doesn't remove it from your credit report, but will cause the account to be marked as "paid." It is still a good idea to pay your debts, just be aware that the major change in your report won't come until the negative records expire.

Being a co-signer doesn't make you responsible for the account - When you open a joint account or co-sign on a loan, you are taking on legal responsibility for the account. Any activity on these shared accounts, good or bad, will show up on both people's credit reports. If you co-sign for a friend's auto loan and they don't make the payments, your credit profile will be hurt by their actions and vice versa. The only way to stop this double reporting is to refinance the loan or to have the creditor officially remove you from the account.

Paying off a debt will add 50 points to your credit score - Your credit score is calculated using a complex algorithm that takes into account hundreds of factors and values. It is very hard to predict how many points you can gain by changing one factor. For a person with a high credit score, just one late payment can cause a significant drop. If a person has a low credit score, it may not cause a large drop at all. Just keep paying your bills on time, reducing your debts, and removing negative inaccuracies from your credit report. Good financial behavior and time are the two most important factors for your credit score.

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Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

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I found two mistakes on my credit report showing as in collections.  When these two debts wrongly

put in collections, one $29, the other approximately $59 , are remedied and taken out, what, if any, is the number pf points my score will improve? 

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Credit scores are so dang inaccurate, there seriously needs to be an entirely new system.

Example: My score is 640's and Ive NEVER missed a payment on anything in my life. I have had multiple Auto loans which were all paid off in full years before they were at the full terms. I have $15,000 plus credit lines and have Never had a higher balance than 5k ALL balances are paid in full inside a month period ever time. Bills have never been late, Mortgage is always OVER paid each month same with current car loan etc. etc. etc. Ive been managing my own finances flawlessly for over 10 years. BUT did I mention that 1 time when I was 18yr old I slipped, Broke my thumb, had a Dr. visit without treatment and never received a bill? Well... apparently a bill was sent to an address (not my Address) for $121.00 and I never knew about it... 6 years later I found out that this medical bill went to collections and THAT is the reason for 10 years Ive been in the 600's. I make about 75k a year... Would I really skip town on $121 bucks? Common, I don't think so. 

Now my wife on the other hand has all scores in the 770 range. She never had her own line of credit until after we were married. Never paid a single bill in her life or ever had any debt or real income before. Even now all credit lines Im listed as the primary. She has never had an auto loan, credit card or nothing and yet lenders are tripping over themselves to give her high credit lines and auto loans etc. 

Still to this day, If I were to apply for a low limit credit card Id prob be denied. If they only knew...

Talk about a messed up system huh?

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Reply by
theheat71

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104 People Helped
Helpful to 2 out of 2 people

Well what did CK say about your "GRADES" for your credit?? Where they all A's??? If they weren't then you need to check that out. Other factors you didn't mention could be numerous inquiries, credit cards over half their limit, new negative info from collection agencies e.t.c. Get on the ball and do something about it (smile).

Reply by
KFXYAM4000

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0 People Helped

you are correct,they screw you around you can complain even show them they are wrong!but to no avail i feel with you

Reply by
rberlin

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Grades are all A except Hard Inquiry is D. Even so this only makes a marginal difference. Ive studied credit scoring in college and would say I have a better than average understanding of how the credit bureaus gather information. The other factors I did already mention. I don't have any credit card balances, or negative info etc.

The point of my post wasn't because I don't know what to do, rather to illustrate how inaccurate our credit rating system really is. Where very financially responsible people's credit can be severely hurt for many years due to someone else's small mistake. 

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I co-signed for a loan with my gf for her schooling. My credit score was 722 and now it's 615, the next month. did a hard inquiry on my credit drop me 107 points? We did not get the loan. I had higher credit than she did.

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How is it that when ,using Credit Kharma, they said I had to thin of file and could not give me a credit score and I go to a different site and they give me a 595? I know I have very little credit because of not having any established, thats what I have been trying to do is build credit. But how is it that I am getting two different scores or as they said, no score at all?

Reply by
KarinUSA

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Wow!  I am KarinUSA, but this post isn't mine.  Should I alert someone?  I have a long and decent credit history.

Reply by
bkerns84

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CreditKarma uses data from TransUnion I believe.  Wow, you need to work on your score.  Pay on time and keep your utilizatin under 35% per revolving account.  Plus, it takes time to build a great score.

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Hello, I need some advise on having my paid collections removed from my credit report. Can anyone share some information on disputing paid collections?  

Reply by
yellowbomber

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0 People Helped

u have to make a deal with the collection agency to remove it. they rarely do though. even though u paid it it still remains on ur report for up to 7 years

Reply by
atiqua1

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0 People Helped

Ok, I'll try that. Thanks!!!

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Reply by
gatorman

11 Contributions
62 People Helped

to effectively remove paid collections, you must contact the originator of your creditl. informing them the collection has in fact been satisfied, since they are under no obligation to remove it. a well writen letter asking for their help removing it will go along way, they are the ones who can contact the collection agency to remove it. good luck hope my advice helps..

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 I had a home mortgage loan with Country Wide for over 5 yrs. Then Bank of America bought them and my loan. When I refinanced my loan to take advantage of the lower interest rate, I was abruptly rewarded by having a drop in average age of my open accounts. That is not fair and accurate.

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 I  have a redit score of 569. I aam currently trying to pay things off and get my score up to a reasonable one. How can I do this when it is hard to come up with the money to pay down on things? A lot of my bad credit history happened when I was married, now that I'm divorced I'm finding it hard to do anything. I would like a small loan like 5,000 or 6,000 to pay off the little stuff and then work my way up to the bigger things. Am I doing this the right way or what should I do?

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Any new articles from 2010 or 2011??? 

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0 People Helped

just joined i like the info very much its truley free

bino

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I have had zip credit for years in the past. But I have found that not having any credit cards is enjoyable. If I don't have the cash to buy something I don't get it. :) Sure, I can't buy a house, I had to get creative lending to buy a car...

but now that I have paid off my car...

added 3 credit cards...

100% on-time payment history...

my score has since dropped 50 points. (okay, okay, I did buy stuff with my cc! But it will be paid off quickly in the New year!)

Student loan out the wazoo is hurting me tremendously. It's total is 50% of my annual income. It is in good standing, thank goodness. That is one thing I don't mess around with. Student loans suck. If you are in default of said loan you are out of luck as far as your score goes. If you are in good standing and make your payments on time, it does nothing positive for your score. It only hurts your score until it is paid off. It doesn't even count as a line of credit or loan in your score. 

My goal is to raise my score 150 points in 3 years. Has anyone done that? Wish me luck, I really want my dream house.

I will say, I miss the stress-free life of not caring about what my score is.

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