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Five Myths About Your Credit Score

Your credit score is the triple digit number that represents your credit worthiness or in simple the terms the number that determines how likely it is that you will pay back the money you borrow.  Lenders, such as banks and credit card companies use your credit score to determine whether or not to lend you money, how much money to lend you and at what interest rate.  The better your credit score, the more money you can borrow and the lower the interest rate.  Myths about your credit score have blossomed over the years.  Below is a list of myths and the truth behind these erroneous beliefs.    

Myth Number 1:  The higher your salary, the higher your score

The truth is your income has nothing to do with your credit score or credit report.  Your credit score and report are solely based on your ability to pay your bills in a timely fashion and nothing more.  Your personal wealth, or lack thereof, is irrelevant.

Myth No. 2:  During the application process your credit score can cost you the job

While most employers do a credit check today, they are only entitled to receive a copy of your credit report with your express written consent.  Employers, potential or existing are not entitled to see a copy of your score. 

Myth 3:  Closing your credit card accounts will improve your score

While closing an account may make sense for you financially, it will not always have a positive effect on your credit score.  In fact, closing an active credit card account may actually lower your score depending on how high a balance you carry compared to your credit limit.  If you close a credit card account, it may affect your "credit utilization" (the amount of your balance compared to your amount of available credit), a factor used to help determine your credit score.   

Myth 4:  Looking at your credit report will lower your score

There are two different types of inquiries-soft and hard.  A soft inquiry does not affect your score and a hard does.  Soft inquiries include pulls done for promotional purposes and your own personal inquiries.  You may pull your own report as often as you like and it will never affect your score.  Hard inquiries are those performed by creditors and will affect your score.  Hard inquiries include pulls made when you apply for credit, when an existing creditor looks at your report or when a collector looks at your report. 

Myth No. 5:  There is only one credit score

Fact is, there are many different credit scores and your score may vary depending on which company is used and which credit reporting agency's information is used.  

If you need additional information regarding your credit report and credit score and wish to speak with a licensed attorney, contact SmithMarco P.C. for a free case review.

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