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Demystifying Four Credit Myths

There are many myths when it comes to your credit score and credit report. These myths will probably always float around in space somewhere, but if you are reading today’s post and read my blog, then hopefully we can demystify these credit score and credit report myths and make everyone just a little bit smarter today.

Below are four common credit score and credit report myths that you may have heard of and even fallen for:

1. Does your job affect your credit?

Your job and your income have absolutely no effect on your credit score.

In fact, you could have an almost perfect credit score with no job, no income or reliable source of income provided you were able to always make your payments on time (yeah, you might have to be independently wealthy or something to always have the money…but… It is possible…).

Contrary to what some people may think, it is not essential to have a job or income to have great credit as both of those things are deemed irrelevant and are not even part of your credit reports and scores.

2. What hurts your credit more?

Demystifying Four Credit MythsAnd a 30-day late payment in 2011 may be more detrimental to your score than a bankruptcy in 2010. The most pressing factor of how much impact something has on your credit is how recently it occurred.

With credit, time heals all wounds, no matter how brutal they were at the time. So keep your payments current and if something bad happened in your past, time will pass and you’ll get over it. But if you are frequently late on your payments, that is over 30 days late….one or two days usually doesn’t count much towards reporting, your credit will suffer, over and over again.

3. When should you pay your bill? Or should you pay it in full at all?

Pay off your balance every month or keep a small balance, the experts are divided on this. Economically it is better to pay off the balance, keeps you from paying interest, however, having an unused credit card does not help your credit much. So if you’ve got it, use it periodically.

4. Should you close your old accounts to help your credit score?

Don’t close out your old accounts. As we have mentioned here about a bazillion times the debt to available credit ratio on your credit report is crucial.

Try to keep your debt at about 20% or less of your available credit and don’t close out available credit as that reduces it on the other side. The trick to good credit is having it available but barely using it!

What credit score and credit report myths have you heard?

Have you fallen victim to any of them?

 

Image via Flickr by Ata Ur Rehman

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