Credit reports and Scores Often Confuse Consumers
Posted on May 27, 2010
Filed Under Credit, Personal Finance | Leave a Comment
Most people who are of an age to care about their credit understand that the three primary credit reporting agencies, Experian, Trans Union and Equifax, maintain credit reports on them. The reporting agencies continue to keep track of loans, bank cards and bankruptcies and make note of whether each consumer pays his or her bills punctually. Most individuals are also aware that their history of credit is also accessible in the form of a FICO score, which is, in essence, their overall credit health distilled to a three-digit number.
Moreover, many people have, at ideal, a hazy understanding about how their financial dealings are viewed by the credit agencies. There are quite a few myths and misconceptions about credit history and credit ratings and how they are affected by things people do financially. Here are a few good examples of these popular misconceptions:
A consumer has only one credit score – Not true. Each bureau keeps track of financial transactions independently of the others and may have more or less information to work with than the other credit reporting agencies. Plus, until recently, each agency used their own scoring system. In all likelihood, if a consumer were to contact each bureau to obtain his or her credit score, the result would be three completely different figures.
Your salary affects your credit score – Your score is just a reflection of how well you handle the credit accessible to you. If you earn more money, you might have more readily available credit, or not. Either way, the score is just a representation of what type of credit you have and whether you pay your bills in a timely manner. How much you earn isn’t part of the formula.
Eliminating a credit card boosts your credit score – Not necessarily true. Credit agencies analyze how much of your accessible credit you are making use of. Less is more; the agencies like to see that you’re making use of as little of your available credit as possible. If you owe a lot of money on charge cards and you terminate an abandoned account, it may seem like you are using a larger portion of your accessible credit. That will really raise your score!
Marriage merges credit history – Your credit history is your own. That will not change in the event that you get married. Jointly borrowed cash will show up on both reports and will affect both of your scores. And just as marriage does not merge the reports, divorce will not separate the joint items. If you get divorced and your ex doesn’t pay on your joint loans, your score will decrease.
The process of compiling credit scores is a complicated one. It is understandable that a lot of individuals don’t completely understand how the technique works. Perhaps the ideal way to continue to keep tabs on what is going on with your own finances is to check your credit score on a regular basis. You can get a copy of your credit report at AnnualCreditReport.com.
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- Raising Your FICO Scores Almost Immediately By Removing Charge Offs From Your Credit Report
- Ways To Get No Cost Credit Reports
- Credit Scores Don’t Mean Everything
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