Top 5 Credit Misconceptions Debunked

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Top 5 Credit Misconceptions Debunked

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 #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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Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates.

Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.

All Comments

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1 Contribution
0 People Helped

I have outstanding student loans but they are all on default and I was told it would not hurt me for 6m or a year and then I check my score and its the lowest its been since my bankurpty, so Im really confused on what I need to do to increase my low score. 

1 Contribution
0 People Helped

i filed for bankruptcy back in March and in June i received my discharge papers. Shortly after (weeks later) i checked my credit score and to my surprise my credit was 655. I decided to apply for a credit card and guess what, i got approved. i certainly wont spend out of control but happy that i was approved. don't understand much about the credit scale anymore.

Reply by
pattymae00

1 Contribution
0 People Helped

What card did you get & @ what rate. Thanks

Reply by
duster323

5 Contributions
9 People Helped

this same thing happened to me. i applied for a plaza tire card thinking i wouldnt get it.... i did! the limit was 800. i used it ONLY WHEN I HAD THE CASH TO BACK IT, then two months later applied for an orchard bank, got it also only limit is 300. same only used when have cash, about three months of using these cards at 25 to thirty dollars a month i applied for a capital one card, again i got it, no intrest till june 2011! if you pay in full every month the intrest wont hit your card! also as an update i just recently found out my plaza limit was raised to 1200, i didnt ask them to do it so that was nice, feels amazing to FINALLY be on right track. For you who dont know what plaza tire card is, firestone has same thing, there the same card, i HATE paying someone to work on my car but i only used it for oil changes and small stuff to improve credit

1 Contribution
0 People Helped

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
bkerns84

2 Contributions
2 People Helped

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.

Reply by
KarinUSA

3 Contributions
0 People Helped

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

1 Contribution
0 People Helped

I have a 570 credit score through this site. Can I get a gas credit card? Also, will this credit score be the same on the top 3 credit bureaus?

3 Contributions
0 People Helped

There are three ratings agencies which have different scores. Which one does Creditkarma use or is it a composite or something else altogether?

We use TransRisk developed by TransUnion.

Review by
CK Moderator

3 Contributions
0 People Helped

I am constantly getting offers from Citi and Chase to get their credit cards. I do not need another card but would like to improve my rating. I believe having more accounts is a plus but hard inuiries is a minus. Also it would shorten my average lifespan of credit accounts which is a minus. So would the net effect be positive or negative?

1 Contribution
0 People Helped

i have a 606 can i buy a house

Perhaps with a FHA loan

Review by
CK Moderator

Top Contributor

Reply by
tattoo666

13 Contributions
1 Person Helped

They will look at your credit but you income to debt ratio is a big part of getting financing for a house. After what happened with the sub-prime lending market it is getting harder with a lower score unless they see a lot of money coming in and very low amount of reaccuring monthly bills like car payments.

1 Contribution
0 People Helped

I am currently at 610 and I am using a credit debt management program and it is paying my balances down at a lot faster rate than I could on my own. My score has actually gone up, I have a huge joint mortgage with my husband and it is killing me because my pay doesn't reflect what I make, which my husband pays the entire amount, i have never paid a penny on it. It is a second home and I want to remove my name from the mortgage.Would my score go up if I did this?

Reply by
sheila75

9 Contributions
1 Person Helped

Definetley, your debt to income ratio would change for the better if you did not have that mortgage showing up as your debt.

1 Contribution
0 People Helped

I became an additional card holder on a relative’s credit card in order to improve my credit. I never never used the card. My relative has lost her job and is now behind on bills. She said that she has contacted the companies to have me removed. If she was late 30 days before she removed me, how will this affect my credit and what should I do.

Reply by
242ti

1 Contribution
0 People Helped

When you are removed from the card, all the history will be removed as well....including any negatives. If a negative hits your credit before you are removed, it should only stay on there for a month or two before the history is removed. You should also be able to contact the company yourself to remove yourself. You will probably need to get her account #, but that is all.

2 Contributions
0 People Helped

"Negative records such as collection accounts, bankruptcies and late payments will remain on your credit reports for 7-10 years."

But, I am in a peculiar Catch-22. A Federal Tax Lien was filed against me in 2002. It would normally drop off of my Credit Report in 2012. And it would have, if I had not settled it in 2007, converting it to "Paid, Released."

But, as I understand it, there is a "penalty" for settling the Lien, rather than just ignoring it. Now, instead of dropping off in 2012, it will remain until 2014--seven years from the 2007 Release Date.

Am I correct about this? It is surely not the intent of the law. Is there any way for me to request fair and rational treatment? From whom?

There is a distinction between staying on your credit report and affect your credit. You are generally better off by paying all past debts even if they may hurt in the short run.

Review by
CK Moderator

Reply by
jmills625

2 Contributions
0 People Helped

Unfortunately, with the Fair Credit Reporting Act 7 years is the max amount of time for a charge off even if a State says otherwise such as 3 years, etc. The FCRA was the biggest rip off for consumers. In your case (seek legal advice if needed) whenever you pay after the typical 180 days delinquency date you would add 7 years from that date but if you settle or negotiate a payment etc. it will create a refresh on your credit report because it wouldn't become delinquent at that point. Always, always get it in writing from the collector as part of the contract to not report delinquent or derogatory material to the credit bureaus. And you want to keep negotiations with the original creditor because of multiple reporting in most cases. In your case of a Federal Tax Lien (not State) you really don't have much recourse. If it was a State or Local county lien you would have more probable use of your rights.

Top Contributor

Reply by
tattoo666

13 Contributions
1 Person Helped

From what I understand, 7 years from the last activity on the account. So if it was there for 5 years and then you paid it off there was activity and it will be 7 years from that point.

Reply by
sheila75

9 Contributions
1 Person Helped

Thats right! When i went through my divorce and settled with the bank I was told that it was there for 10 years instead of 7 years. I was so mad that I asked them if i basically ****ed myself, and they said if that was the way i wanted to look at it. My ex got the truck I thought I was doing the right thing and it would help protect my credit. I WAS WRONG!

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