#1: You Can Remove Less Favorable Accounts to Boost Your Credit Score

This is based on the idea that the credit score formula takes into account all a consumer’s accounts and their payment history for the last seven years. The myth states if the account is closed it doesn’t exist any more and therefore will not be on your credit report. This is far from the truth. If you do close an account it just doesn’t disappear it stays on your credit report for a long time along with it’s payment history. This means if you paid this closed account late last month, this late payment will be on your credit report for the next 7 years and will be included in your credit score.

#2: If You Get More Credit You Will Improve Your Credit Score

Actually, Fair Isaac, the creators of the FICO score, state that it will not improve your credit score. There are several other pieces to your credit score that will be affected by getting new credit. First is the average account age. Having a new account will drop your average account age which is another major part of your score. Second is the act of applying for new credit will be seen as a hard inquiry which the credit score formula also counts. So depending on your credit situation this might even hurt your score so be wary before doing so. If you don’t need credit don’t apply for it. More than likely there is a reason why a consumer is carrying a large amount of debt and having more available only increases their risk to have more. It would be better to figure out a method to pay down the existing debt to improve your debt to credit ratio.

#3 Shopping for Credit Will Hurt Your Score

The myth is based of the idea that every time a consumer applies for credit it will count as a hard inquiry and go against their score. This credit myth is both true and false. It really depends on the type of credit the consumer is shopping for. An example of this is consumers are allowed to shop of loans that are large purchase such as a mortgage or auto loan. These are large purchases that consumers need the availability to shop so they get the best deals. Credit Cards are different. Consumers should not shop for credit cards. The terms and conditions are stated up front and there is no negotiation. Therefore, every time a consumer applies for a credit card it will be considered a hard inquiry and this should be avoided.

#4 If You Are Well-Off You Have a Good Credit Score

It is commonly believed if you have a lot of money you have a good credit score. Well, this actually might not be the case. Many individuals that seem to have money have a lot of debt. The persona of having expensive cars can houses is held up by huge amounts of debt that will eventually kill a credit score. Many of individuals like this live beyond their means. It always baffles people when they hear a celebrity or a sport figure go bankrupt but it will happen if there is terrible management of cash flow and debt.

#5 Adding 100 Word Statements to Your Credit Report Will Help

A 100 word statement is side of the story when it comes to an item on your credit report. While it will provide your side of the story when it comes to that late payment of your phone bill, it will not be included in the credit score calculation. There is no way for it to be considered. So if you are thinking about adding a 100 word statement just keep that in mind.

#6 Use Another Person’s Accounts to Improve Your Credit Score

The practice is to do what as known as piggybacking. This is when you find a person willing to add a consumer to their account so they get the benefit of their great payment history. There are many firms out there that are even selling this solution to improve your score, but new changes to the credit score formula could put an end to this practice. The new FICO score formula fives no boost in scores for this practice and it is seen as deceptive.

7# Your Credit Score is Free

This one is one of the largest myths you will here. There are site dedicated to offering a so called “free credit score”. It should be known by law consumers are entitled to one free credit report once per year from each credit bureau. This law does not state a free credit report. The ads you hear for a free credit score comes with strings. It usually includes, the consumer signing up for a credit monitoring program. It is free for the first month and then a monthly charge there after. These are not a bad thing and there are many benefits to a credit monitoring program but that really wasn’t what the consumer was shopping for. The free credit score is the lure. So if you sign up for one of these deals you must cancel within the stated grace period of you will be charged.  There is no better example of this than the post on Free Credit Report.com Versus Annual Credit Report.com

#8 Close Old Unused Accounts

This credit score myth is based on the fact by having a lot of available credit you represent a higher risk to lenders and will have a lower credit score or something like that. What might happen if you do close these account you will kill your account history. Mainly this could be two different things: maybe closing the oldest account you have and dropping your average account age. These are two detrimental actions to your credit score and need to be avoided. It should be said that closing an account is not always a negative thing for instance if you are a consumer who is having trouble controlling spending. Not having this available line of credit might save you from yourself, but this might also be achieved by just shredding the credit score. It is your choice.

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The rules that are followed here are laid out by the Fair Credit Reporting Act.  It states employers do have the right to review your credit report as a form of a background check.  This does not happen without you knowing though.  The employer must receive your written permission before they can access your credit report and this will included the employee signing off on it.

When an employer has your permission they then will request your credit report from one or all of the three major credit bureaus.  What they get from them is what is known as an “employment report.”  This is report includes all the same information as a normal credit report, but it will not include your credit score.

So when you applying for a job and you are concern about your credit standing you should check your credit report.   Even though this is what really matters to the employer it would hurt to review your credit score when you are doing so.  Also, if you are concern it is not the cleanest report and could be a potential problem, you have a few options.  First would be to dispute credit report errors.  This will be one of the quickest ways to improve your credit standing.  Other methods could take some time, but paying your bills on time is one of the biggest.

If you are wanting to check out how you stand visit MyFICO to get your Fico Scores/Reports.  This is the best place to get both.

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1. You Gain Access to Your Credit Report More than Once Per Year

If you were unaware you are allowed to review your credit reports free one time per year.  That is it.  If you want to see it twice or three times you are going to need to pay.  Credit monitoring will give you access to your credit reports more than once.  The plans allow for a set number of times and some are even unlimited.  This is ideal if you are trying to stay on top of your credit report.

2. It Will Come with a Credit Score

A credit report might be free one time per year, but there is no such this as a free credit score.  Actually you will find anything that states a free credit score will have you signing up for a credit monitoring service.  Also, depending on the plan you choose you can get access to your credit score more than once per year.  A nice ideal if you are trying to keep an eye on your credit

3. Most Plans Come with Identity Theft Insurance

Most credit monitoring services that you will find will come with some form of identity theft insurance in varying amounts.  It is usually around the $15,000 to $20,000 range.  This is a huge benefit.  The cost per victim for identity theft is somewhere around $5,000.  So you are covered.  That is nice to know.

4. You will get Updates to Any Changes to Your Credit Report

This is great for two reasons: Improvement and Protection.  If you are trying to improve your credit standing then you will know what is being added to your credit report.  You will be able to stay on top of its accuracy and be able to dispute errors that are new.  It will protect your credit score and standing becuase you will be able to tell if someone is trying to access your identity.  It will help you from being a victim of crimes like identity theft.

Alerts are usually offered by text message.  This will help to guarantee that you are on top of anything that is going on with your credit report.

5. It Can Be Cheaper

If you want to review your credit report and score more than once per year you will more than likely save money with credit monitoring.  If you pay for a 3 in 1 credit report with a credit score, it will be somewhere around $30 to $40.  A credit monitoring service on the other hand can be as cheap as $50 a year, FICO® Quarterly Monitoring.  So you can actually save money with credit monitoring.

6. They Come with a Free Trial

Also, all the credit monitoring services come with a free trial.  You get to try before you buy.  Also, if you sign up you will get your credit score before you even pay.  That is why you will find offers for a free credit score.  You can shop around and even try before you choose the one you think will work.  Score Watch® is one that has a thirty day free trial.

7. It Could Save You Money

Some credit monitoring service not only alert you of changes to your credit report, but also when your credit score reaches a certain level.  Score Watch from MyFICO alerts you when you qualify for a better interest rate.  If there was one thing that would make it pay for itself it is this.  A better interest rate will save you thousands or even ten of thousands over the course of your life.

8. Helps You Plan How to Improve Your Credit Score

Most of the credit monitoring services come with a credit score stimulator.  It lets you plug-in different actions to see what would happen to your credit score.  A nice idea if you don’t know what you should do next.

9. You Won’t have to Monitor Your Credit

If you are thinking you could just do this on your own, you are probably right.  But the truth is that is going to take some discipline on your part.  It is much easier to have a credit monitoring service do this for you.  Also, the time you will save should be added into the equation.

Another point is a credit monitoring whole purpose is to monitor credit.  This is more than likely not your purpose.  They will catch things you won’t.  Also, you will only be checking your credit report every couple months or so.  They will be watching your credit report 24/7 365 days a year.  You will never even come close.

Conclusion

This might seem like a sales pitch for a credit monitoring service and it is.  The facts are it is going to save you money.  Also, it will protect you against identity theft.  It is cheaper than looking at a 3 in 1 credit reports.  It could help you to improve your credit score.  Also, there is a free trial to see if you want to do it.

Any person that is concerned with their credit and credit standing should really consider credit monitoring.  Here is a list of the top 4 credit monitoring services.

1. Equifax Credit Watch Gold 3-in-1
   
2. Equifax Score Watch
   
3. FICO Score Watch
   
4. FICO® Quarterly Monitoring
   

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2. Maintain a low balances. You should try to keep your balances below 30% to 40% of your credit limit

3. Open new accounts only if you need them.  If you are think that adding a new account will be favorable for your credit score, you probably shouldn’t.  This usually has on effect and it is not proven to give a boost in your credit score

4. Have a credit card – There are many debt gurus that abdicate not to have any credit cards.  In regards to getting a good credit score, you must have a credit card or two.  Without these you will represent a much higher credit risk to lenders.  You just need to be responsible with these lines of credit.

5. Closing Accounts will not take them off your credit report.  Closed accounts will stay on your credit report.  Furthermore, your payment history to that account will be taken into account when determining your credit score.

6. Shop around for a mortgage or car loan, Don’t shop for a credit card. The credit score formula differentiates shopping for a loan or shopping for ten new credit cards.  So you are allowed to shop for a mortgage, but each new credit card will count as an individual inquiry.

7. Don’t open new accounts to get a good initial rate. These new accounts are going to lower you credit score.  This makes the in store initial discount not worth it and they should be avoided.

8. Don’t open a lot of new accounts at once.  If you have a short or long credit history you should not try to get a lot of new credit fast.  This will lower your credit score.

9. Check your Credit report for Errors.  Bankrate.com states that 70% of credit reports have errors on them.  Dispute errors this could give you an initial boost.

10. Don’t lower your credit limits.  If you are not using the credit great, but don’t lower your limits.  This will hurt your utilization.

11. Don’t close old accounts.  This will not only lower your utilization but could hurt your credit history.  Keep the old accounts and use them from time to time to ensure your account doesn’t close it.

12. If you having trouble paying your bills contact your creditors. If you are having trouble making payment, you should call your creditors and try to make any arrangement.  This will protect your credit score if you can come to agreement and give you some breathing room.

13. Get current! If you have a missed payment you must do anything you can to pay it and get current.  This will prevent additional late fees and reduce its severity.

14. Protect your identity. Check you credit report for identity theft this has been on the rise and can wreck a good credit score.  Either pay for credit monitoring service or credit your 3 in 1 credit report every 6 months.

15. Be wary of balances transfers. If you do use balance transfers to consolidation your credit card debt, don’t think you can start spending again.  Pay it off.  The majority of people add this debt back and then some.

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The real truth is this is just a general rating.  The person who really determines if you have a good credit score will be the lender.  Keep in mind, that each lender has their own guidelines they follow.  So if you have a credit score of 700,  lender A will give you a nice interest rate, but lender B might not give as attractive of a rate.  It truly is in the eye of the lender.

Another consideration is the credit crisis the country seems to currently be in.  This has made it increasingly hard to get credit.  Furthermore, creditors have start to reconsider their lending guidelines making a higher score needed to get a loan.

The rule you should follow is the higher the better.  Any credit score at or above 700 is a good credit score.  You are better than average and should not have a hard time getting approved for a loan.

How to get a good credit score

To start on a path to a good credit score, you need to know several things.

First, how is a credit score calculated.  It is a complex formula that takes several factors into account that are found on your credit report.  Here is the list along with their weight:

1. Payment History 35%
2. How Much You Owe 30%
3. Your Credit History 15%
4. Applications for Credit 10%
5. Your Credit Mix 10%

The next part is to get a copy of all your credit reports and credit score.  You want to either get a 3 in 1 credit report with a credit score or check out MyFICO to get your Fico Scores/Reports.  You want all three because there are things that could be on one report but not another.  Also, you want your credit score to see where you are starting and to set a goal for yourself.  This is a must if you want to get a good credit score.  These are not free but they are worth it considering how much money you could save by you having a good credit score.

Now that you have you credit reports, the next step is to review your credit reports and check for any mistakes.  You need to dispute credit report errors.  Around 70% of credit reports have errors on them and your credit reports more than likely have some.  This could be one the easiest and most forgotten about ways to improve your credit score.

Next is to use what you learned about what goes into your credit score to push your score higher.  One the biggest is to just pay your bills on time.  This has the largest effect on your score and late payments will only drag you down.  Other things like: paying down your debt, don’t apply for new credit on a regular basis, and use many different types of credit will also lead you in the right direct.

The truth is you should be trying to get not only a good credit score but an excellent one.  These are scores above 750 and really have huge benefits through out your life.  Check out how to get a excellent credit score.

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The first question is do you pay on time.  If you want an excellent credit score, you should never miss a payment.  Even one late payment can set you back and using budgets or online bill pay can be easy way to ensure you are on top of it.

How much do you owe?  Do you carry credit card balances month to month?  If so, what is your utilization on your revolving lines of credit.  You should try to keep this below 15%.

Limit the amounts of credit you have.  You should avoid every credit card offer you get in the mail or offered to you in a store.  You should stick to just a few credit cards and don’t consistently add to the list.  This will help you develop a stronger credit history in regards to your average age.  Also, this will limit your credit inquiries or applications for credit.

Use different types of credit.  An excellent credit score will use many different types of credit.  This is commonly referred to as a healthy mix.  Having a mortgage or some other installment loan will so you can manage different forms of credit not just credit cards.

If your goal is to have an excellent credit score, you need to be always on top of it.  This is just another thing in your busy life.  But if you don’t you are sacrificing thousands in saved money.  The answer for people really serious about getting an excellent credit score is to sign up for credit monitoring.

OK, it does cost money, but any improvement in your credit score will pay off ten fold.  If you are checking your credit score on a regular basis it is costing you money any ways.   Remember credit report is free but not a credit score.  So if you are going to spend  $30 to get your credit score, you should just sign up for FICO® Quarterly Monitoring.  This is $50 a year and you get 4 reviews of your credit score and your FICO credit score.

This is not a bad deal considering a 3 in 1 credit report with just one credit score costs $39.  The idea of credit monitoring is something that will help you sleep at night.  Getting something like this shows you want to have not just a good score but an excellent one.

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This can almost be too late.  For example if you have a credit report errors.  These are going to take at least 30 to 45 days to be disputed and possibly removed from your credit report.  If they are not removed, you then have to contact your account to dispute the item and hopefully have them remove it.  This will take even more time.

A more aggressive approach is to check you credit report every six months.  I know that you get just one free one per year, but shows your financial fitness.  You need to protect it.

If you just want to sleep at night not thinking about checking your credit report every 6 months you could sign up for a credit monitoring program.  They do cost money, but not as much as you think.  The best bang for your buck is the MyFICO quarterly monitoring.

So lets compare this to a 3in1 credit report that you would normally get which costs 39.95.  This is every single one you get costs this much.  With MyFICO quarterly monitoring it costs $49.95 per year.  That is just $10 more.  What you get will quarterly monitoring is a lot.  First, you get to review your credit report every quarter.  You will also get your FICO score every quarter.  Plus you will get $25,000 in identity theft insurance.

So if you are wanting to check your report twice a year you would spend around $80.  If you want to check your credit report and get your FICO score quarterly it cost $49.95.  Check it out for yourself: FICO® Quarterly Monitoring

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How is this going to improve you credit score.  Well, if you have an error it is more than likely a negative one.  If you dispute the error and it is found to be incorrect, it will taken off your credit report.  This negative factor will no longer be in the equations and has the potential effect of raising your credit score.

The first part of this equation is to get a copy of your three credit reports that is right all of them.  Here are some links to some sites that you can find all three.

• Fico Scores/Reports
  
• Get an Equifax 3-in-1 Credit Report Now
  
• Get Your Free 3-in-1 Credit Report
  

Why all three? Because each credit bureaus has their own report on you and they don’t share data.  Also, your accounts are not required to report to all three.  So if an account reports to just one credit bureau and their reports will state something that isn’t true.  So, if you don’t have the right report you will never find it.

Here is a quick overview of the error disputing process.  If an error is reported to the credit bureau, they have to investigate it and get back to you within 30 days.  The investigation involves contacting your account and asking them if this information is not correct.  If the account agrees that it is wrong or they don’t respond back it will be removed from your credit report.  If the account says it is correct it stays.  If this is still an error you must then take it up with your account.

Now lets review your credit report and the things to look for.  You should keep a separate piece of paper or some way to record what you think are errors.  This will serve as a quick reference and as a checklist for you to follow up on.

The things to Look For

The first section is your personal information.

• Name
• Social Security Number
• Birth date
• Addresses

A common error could be the misspelling your name.  But if you see addresses that you have never lived at, this could be the sign of a much bigger problem like identity theft.  Hopefully not, but write down any errors you see.

The next section is your accounts.  Here is what to look for here:

• Any Late Payments older than seven years.  These can be removed.
• Accounts that you don’t know about.  This again could be a sign of identity theft.
• Your spouse’s debts that they had before marriage.
• Delinquencies that you didn’t know about

The next thing to look at is your inquiries.  Here are two things to look for:

• Any inquiries that are old then two years.  These can be removed.
• Any hard inquiries you didn’t know about.

The last thing to look at on your credit report is your collections and public records.  Here is what to look for:

• any bankruptcies older than 10 years.  These can be removed from your credit report.
• paid liens or judgments older than seven years.  These can be removed.
• duplicate collections.  This is often the case if you have been sent to collections and then a collection agency sells the debt to another.  It could have the presence of two collections and can be removed.

Now, that you have your list, you need to do your research.  It is best if you have some proof on your side when disputing errors.  After this you can dispute the mistakes.  There are three ways: telephone, mail, and online.  Here is that information for each credit bureau:

Experian

• Mail: Experian Disputes -  P.O. Box 2104 Allen, TX 75013
• Phone: (888) 397-3742
• Experian Dispute

Equifax

• Mail: Equifax Disputes – P.O. Box  740256 Atlanta, GA 30374
• Phone: (866) 238 8067
• Equifax Dispute

TransUnion

• TransUnion Disputes  – 2 Baldwin Place P.O. Box 100 Chester, PA 19022
• Phone: (800)916-8800
• TransUnion Dispute

When you do send in your disputes, you should include your evidence.  This will be forwarded to your account and will help back up your case.  Furthermore, if you do choose to dispute through the mail send the mail certified.  This way you can be assured of its delivery.

The process will begin with the credit bureau contacting your account with the dispute and the information provided.  The account then has a period of time to respond.  If they do not respond in time  it will be removed from your credit report.  If the account responds stating that it is incorrect it will be removed.  Also, your account will be required to contact the other credit bureaus to ensure it is taken off of the other reports.  If the potential error is stated to be true by your account, it will stay on your report.  You then will have to contact your creditor about the error.

The credit bureau’s investigation is conducted over a 30 day period.  Most responses come with in 30 to 45 days.  If there was an error, you are entitled to a new copy of your credit report without the error.  Also, you can request a new report be sent to anyone who has received your credit report in the previous six months.  You can also have a new report sent to any employer who has access your credit report in the last two years.

If the item is unresolved, you can ask the credit bureau to include a statement of the dispute with your credit report.  This will have no effect on your credit score, but will be given to anyone wanting to review your credit report.

The process will take some time so if you are planning to apply for a loan you need to find and fix any possible errors right now.  You should be trying to get the best possible rate on a loan and you need to do anything to improve your credit score.   This is the one of the simplest and quickest way to give you that boost.

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Its use is wide spread, but the recognized use is in the application for credit.  The higher the number makes it more likely for an applicant to be approved for a mortgage, car loan, credit card or any number of different types of credit.

Other uses include insurance applications.  The insurance industry has found that clients with a lower credit score represent a higher risk and therefore must pay a higher premium.  Another use is by employers when doing background checks.  Companies want reliable and responsible employees and a credit check is a prefect way to get the picture about a prospective candidate.  Other uses can include applications for cable, cell phones, and store credit.

This makes your credit score one of the most important numbers in your life.  The better the credit score the more likely a person is to get a loan, credit card, mortgage, and car loan.  The loan will also be at a favorable interest rate, which will save lots of money in the long run.  Furthermore, the last reason a person want to not get a job is becuase of a low credit score.

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