We've 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 with the truth about credit.
Myth #1: You only have one credit score.
The reality is that you can have a wide variety of different scores, not just one... or three. Why? This confusing fact can be attributed to a few different factors.
First off, there are three main national credit bureaus, and they can all have differing information about you. Most lenders aren't required to report to all three bureaus, so one bureau may have information about one of your loans while the other two don't. Differing information can understandably result in different scores.
Secondly, there are dozens of scoring models that could be used to calculate your score. If one model emphasizes your on-time payment history while a different scoring model puts more weight on your credit utilization rate, you could end up with different scores even if they come from the same bureau and are based on the same information.
Lastly, credit scores can change constantly. Lenders are regularly sending new information to the bureaus, so your credit report (and subsequently your scores) could change on a day-to-day basis.
Myth #2: Your score will drop if you check your own credit.
You don't need to be afraid of checking your credit score or report. While hard inquiries, which can be made when you apply for credit, could bring your score down, checking your own score usually results in a soft inquiry, which doesn't harm your credit. Feel free to look at your scores and reports with Credit Karma as often as you'd like -- you won't be penalized or charged a penny.
Myth #3: Closing old accounts is always a good idea.
If you're considering closing an old account, thinking it'll help your credit score, think twice. Canceling old credit accounts could lower your score because you lose the credit limit associated with that account, which can cause your credit utilization rate to increase if you don't cut back your spending. In addition, if it's one of your oldest accounts, it could lower your average age of accounts and damage your score when it falls off of your report.
Myth #4: Being a co-signer doesn't make you responsible for the account.
When you open a joint account or co-sign a loan, you are taking on legal responsibility for the account. Any activity on these shared accounts, good or bad, could show up on both people's credit reports. This means that if you co-sign for a friend's auto loan and he doesn't make the payments, your credit profile could be hurt by his actions and vice versa.
Myth: Credit reports are always accurate. Fact: 1 in 4 consumers discovered errors on their report. [Tweet this]
Myth #5: Your credit reports are always accurate.
In 2013, the Federal Trade Commission found that one in four consumers identified errors on their credit reports that might affect their credit scores. If you want your credit reports and scores to more accurately represent your credit history, you can regularly pull your reports and dispute any inaccuracies you see.
Sponsored by: TrueCredit
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