Thứ Tư, 27 tháng 6, 2012

7 Credit Myths Even Smart People Believe

Everybody knows how important it is to maintain good credit, but a lot of people don’t know how. Some think it’s necessary to revolve a credit card balance to get a higher score or don’t know the impact of checking their own credit. Even people who consider themselves financially savvy or who do a fine job managing their own household budgets can be misinformed.
A recent survey revealed some sizable gaps in America’s knowledge when it comes to our credit, and we talked to some credit counseling professionals who shared the most common myths they have to debunk.
Checking your credit information hurts your score. More than a third of Americans think checking their credit report has a negative impact on their score, according to a new survey conducted by credit card comparison site CreditDonkey.com. In fact, the reverse is true: While an inquiry from a lender will drop your score by a few points, checking your own report can only help you — it doesn’t ding your score and you might even find a mistake that’s been dragging your score down.
(MORE: 5 States With the Worst Credit Scores)
Getting turned down for a credit card hurts your score. “Although the inquiry will show on your credit report, the decision the issuer makes will not,” says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. The inquiry itself is likely to drop your score by a few points, but the lender’s decision doesn’t matter. If you are approved, your score will probably rise, especially if the card has a high credit limit. This is because the availability of untapped credit will improve your credit utilization ratio, which is a significant factor in your credit score.
All three credit bureaus have the same information and will generate the same score. Not all lenders report to all three bureaus, so information — correct or erroneous — can pop up on only one report. “Your reports are not identical and the score is based on what is actually in each report,” Lohrenz says. About one in six respondents to the CreditDonkey survey didn’t know that you need to check your credit with all three bureaus. If you’re thinking about applying for credit, it’s a good idea to take a look at what all three big bureaus have about you. Use the website annualcreditreport.com, which lets you get one report for free from each bureau per year. (Residents of some states get more than one.)
Your credit report includes your credit score. “The credit report reflects credit activity,” says Cunningham, but it’s not the three-digit number itself. “It is the basis of the score, but reports and scores are two entirely different things,” she says. Some consumer advocates have pushed for letting people see their scores as well as their reports for free, but for now, annualcreditreport.com only provides you with the reports on which the scores are based.
(MORE: 5 Things That — Surprisingly — Don’t Hurt Your Credit Score)
Debit cards can help your credit. Fortunately, only about 8% of respondents to CreditDonkey’s survey believe that a debit card can help you build credit or repair damage to a credit score. But as the use of prepaid debit cards continues to grow, this misconception could be an expensive one for an increasing number of consumers. If these people subsequently apply for a loan or a credit card, even a perfect history of prepaid debit use won’t affect whether or not they can borrow and the rate they’ll pay.
“Credit repair” companies can erase credit report blemishes. “No one can guarantee to remove accurate information from your credit report,” says Melinda Opperman, senior vice president of community outreach and industry relations at Springboard Nonprofit Consumer Credit Management. Derogatory information — such as late payments or collections — stays on your credit report for seven years. If the item was a one-time lapse, you can try calling up the creditor and asking (nicely) if they’ll remove the item, but companies that claim to eliminate these black marks for you are bogus. They work by sending a deluge of dispute requests on your behalf. While an item is in dispute, it will temporarily come off your report — but as soon as the creditor verifies the action, it goes right back. “Take the money you’d use for a credit repair company and obtain a secured credit card” to rebuild your credit history, Opperman advises.
(MORE: 5 Ways To Repair A Trashed Credit Score)
Any action is worth a set number of points. ”Exactly how much an event like missing a payment, an account going to collections, a bankruptcy, a repossession, a foreclosure will hurt your credit score depends on many factors,” says Natalie Lohrenz, director of counseling at the Consumer Credit Counseling Service of Orange County. The impact will be different for everybody because the scoring formula takes into account how high your score was to begin with and what else is on your report, along with other minutiae like the age of other negative activities. In general, Lohrenz says, the higher you are, the further you fall. “One small collection account can have a devastating effect on a high credit score, causing it to plummet, but for a mediocre credit score with other issues on the report, it may only have a small incremental effect,” she says.

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