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.