Know Your Rights

Fact or Fiction: The Truth About Your Credit Score

Regardless of what you are purchasing, when applying for a mortgage loan, buying a car or opening up a credit card, lenders want to know what type of risk they are taking before handing over their money.   Lenders use your credit score as a gage for whether or not to lend you money, how much money to lend you and at what rate.  Your credit score is calculated using the information contained in your credit report so it is important to know what is fact and what is fiction when it come to your number. 

Fiction:  A low credit score will stay with me forever

Fact: The fact is your credit score is ever changing.  Just because you have a low score one month, does not mean that you are stuck with that score for an indefinite period of time.  Credit scores can change on a dime depending on how you are paying your debts and how much debt you are carrying.  Your score will change as new information is added to your credit file and the good news is lenders always request a current copy of your report and your credit score before making a determination about whether or not to extend you credit.  If you have a low score now, you should not expect it to turn into a good score overnight, or even in one months time.  It may be gradual, but you are not stuck with a bad score forever.

Fiction:  If I have a low score I will not be approved for credit 

Fact:  Lenders do not solely look at your credit score to make a determination whether or not to extend you credit.  In fact, several factors go into making this decision, including your income, your employment history and your credit history.  This information combined with your credit score will aid lenders in making an informed decision about how much money to lend you and at what interest rate.   Some lenders will lend you money no matter what your score is, however, you should expect a higher interest rate if you have a lower score.

Fiction:  My credit score takes into account factors like my race and socioeconomic class

Fact: The Equal Credit Opportunity Act is the law that was enacted by Congress specifically to avoid lenders taking into account your race, socioeconomic status, marital status and gender in making a determination regarding granting consumers credit.  Lenders are prohibited from using this information on any level.

Fiction:  Submitting credit applications will hurt my score

Fact: Submitting credit applications will not affect your score enough to do any real damage.  In fact, lenders are more likely to look at a consumer who shops around from the best deal as more responsible.   Furthermore, multiple inquiries for the same type of credit are usually treated as a single inquiry and will have little impact on your score.   If, however, you are applying for many different types of credit all within a short period of time, then the multiple applications for credit can begin to affect your score.

If you are having issues with your credit and need assistance, contact SmithMarco P.C. for a free case review. 

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