10 credit score truths and myths

If your personal information gets compromised, a thief will open up financial accounts in your name. However, they will not pay the bills, and this will ruin your credit.

Whether bad credit results from the legitimate credit holder’s irresponsibility or from identity theft, your ability to buy a car, rent a nice place, purchase a home or even get employment can be severely stifled.

1. Credit reports aren’t always accurate. Most have a big error or mistake: 80 percent, actually. Regularly check your credit report.

2. Pulling your credit score will lower it. A “soft” pull is done yourself for personal reasons; it will have zero effect. A “hard inquiry” is when a lender pulls it up for loan approval. It will have a negative impact, but small.

3. A higher income = higher credit score. Income is not relevant to credit score; paying bills on time (or not) is what matters.

4. Credit scores and credit reports are the same. The three big credit reports are Equifax, Experian and Transunion. But there are too many various calculations of credit score to even list here. What matters is your credit managing skills and making sure all 3 large credit bureaus have similar information and scores.

5. Debt settlement removes debt from your credit report. But debt settlement doesn’t fix bad credit. Late payments, bad information and other smears remain for up to seven years following the first “infraction” date.

6. Cash-only payments will improve credit score. You can’t build good credit unless you use credit—and wisely. Get a couple small loans or credit cards and pay them off as you use them.

7. Improve your credit score by closing your credit card accounts. Closing a card lowers your amount of disposable income: the ability to pay off other debt. You don’t want to lower “credit utilization” by closing out a card.

8. Smart management of your various banking accounts will reflect in your credit score. These are not reported to credit bureaus and thus have no impact.

9. Dispute accurate (but negative) information to remove it from your credit report. You can dispute only mistakes. A valid dispute will result in deletion of inaccurate information. A dispute of negative, but accurate, information will achieve nothing.

10. Missed payments that aren’t reported to credit bureaus won’t affect credit score. Any missed or late payment can be reported to a credit bureau.