#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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Here is a quote from USA today that indicates falling credit scores.

From the third quarter of 2008 to the first quarter of 2009 — the latest data available — the average TransUnion credit score dropped 6 points to 651, the credit bureau says. Scores fell more dramatically in states hardest hit by the housing bust: California saw a 10-point drop, for example, and Arizona, 11.

This was actually published in May and now the effect is even larger.

Also, on the other side are the lenders who are being burned by default.  Many of these loads were definitely preditory, but many were to individuals who had good credit.  So the overall effect could be lenders will have higher standards when it comes to giving loans.  So you now have to have an excellent credit score score to get a decent loan.

Actually it is very hard to say what the final outcome of the credit market will be.  Furthermore, the overall effect on the average consumer’s credit score.  With the overall unemployment having the potential of being double digits makes the idea of a positive jump in the average very slim.

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The new credit card laws state that individual under the age of 21 cannot get a credit card without a cosigner or if they can prove they have sufficient income to support having a credit card.  Also, the credit limit on any given credit line can be no larger than $500.  And the total amount of credit available via credit cards cannot exceed 30% of the individual annual income.  Furthermore, credit card companies are no longer allowed to promote on campus.

Why the changes to credit cards?

The answer college students were leaving college with debt and most times this was in excess of $2,000.  This is not a way to enter the real world.  Furthermore, credit card companies were explicitly targeting campus to get new card holders.  Since your first credit card is the one you usually hold onto for the longest period of time, college students are the perfect target.  Also, signups were easy.  It many times took the offering of a tee shirt to get someone to sign up for a credit card.

The truth is that many of these individuals were not ready to manage a credit card.  They need a couple years on thier own before they could realize what it takes to manage credit.

Why the cosigner?

The answer is pretty simple. Since the co signer is more than likely Mom or Dad, there is more accountability to the debt. Even the idea of asking Mom or Dad to co sign for a credit card could be difficult. Parents already know the possible credit pitfalls and won’t want thier children to fall into them. Also, the co signer is responsible for the debt if the card holder does not pay it off. So there is a financial interest by the parents to ensure the credit card is effectively managed.

The idea of using credit card is not a terrible one for individuals under 21. This a world based in credit and these low limits will let individuals learn while not falling into a huge amount of debt.

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That is right more and more employers are checking credit reports as a screening technique for hiring.  The most common scenario you might hear to why this is allowed is a position which you are directly handling cash transactions.  Since your credit report is an indication of how you do handling money in personal life, the company wants to know how you do on your own  so they can guess how you will handle theirs.

Beyond the handling of cash, your credit report is an indicator of the overall risk you represent.  It is seen more as a measure of your responsibility.  If you are completely irresponsible it will show on your credit report and the company is more than likely going to avoid you.

OK, this puts those consumers looking to rebuild in a tough place.  They might a default or maybe even a bankruptcy on thier record and this is going to haunted them when they are looking for a job.

Your Credit Score and Employment

Now, don’t be confused and this happens all the time; Employers check your credit report not your credit score.  First, this isn’t something they do behind your back.  They must have your written permission and you will know.  Also, when they request your credit report from the credit bureaus, the copy they get is what as known as an employment report.  It is taylored to employers and will not include your credit score.

How to Prepare for Your Interview

Well, I am not giving interview tips, but you should check your credit report before you start scheduling interviews.  This helps in two ways.  First, you will know where you stand before you even get started.  Second, you have a little time to dispute any possible errors on your credit report.  This process is not that difficult and may act as a clean up of your credit report if there is a lot of errors.

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If you already have an excellent credit score a single late payment could be pretty painful.  You have excellent credit for a reason and any that indicates a change in behavior such as a late payment will carry a large negative weight.

As stated above getting 30 day late payments removed is possible.  The most common example of this would be error made by your creditor.  They report you as being late even though you have paid on time.  You would find these by checking your credit report on a regular basis and looking for common credit report errors.  You then would follow the dispute process with the credit bureau that provided you with the credit report.

By law, the credit bureau must conduct an investigation into the dispute.  Also, it is wise to provide them with as much evidence as you can find regarding the situation to support your case.  There are two possible outcomes to these disputes.

First, the creditor will look into the situation and find that it was truly an error.  The creditor responds back to the credit bureau saying it was a mistake and really should be removed.  The credit bureau is then obligated to provide you with a new copy of the report without the error.

The second outcome is credit bureau contacts the account and the creditor states that the disputed item is not an error.  In this case it will state on your credit report.  You then will have to contact your account about the situation and try to resolve the issue directly with them.  You can also add a 100 word statement to your account explaining your side of the story.  But you should know that these 100 word statements will not be taken into account when calculating your credit score.

Another scenario is that in fact you really did pay late.  In this case there is little much you can do.  This delinquency is going to be with you for a long time, 7 years.

So really you really need to stay on top of your bills and know when they are due.  Cut the checks early of use online bill pay to ensure it gets there on time.

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What you will find if you are a victim of identity theft

The most indicators from your credit report of identity theft can be found a few different sections.  The first would be your personal information, which includes your name, where you live, employer and social security number.  A red flag would be address that you have never heard of or lived at.  Thefts will need an address they can have items sent to and these unknown addresses could be that.

Another section to review is your payment history.  Another red flag would be accounts that you don’t know about.  These could be account thefts have setup in your name.  Other signs could be collection accounts that you didn’t know about and a list of credit applications that you didn’t apply for.

The last thing you want is to be surprised by collection calls and letters for account you had no idea about.  You should be aware there are other methods such as credit monitoring to protect yourself and locking your credit report.  If you just want to do it yourself by checking your credit report you should have a set schedule of when you are checking.  At least once a year is the most common recommendation for checking your credit report, but sometimes to play it safe checking every six months is not a bad idea.

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If you have not paid an account in 90 days it most always considered in defualt.  If you then pay this account it will be a 90 day late payment.  What is the difference defualt to the account is when they think you will not be paying back the debt.  If you then get current it is a severe late payment.

Also, the longer it takes to get current after 90 days the larger rick you run of being sent to collections.  Now, late payments are one of the worse thing you could do for your credit score, 90 day late payments and old are the most severe cases of this.  The affect of one 90 day late payment could be devastating to your score.

You should really consider your financial health if you are even paying this late.  Without a doubt your creditors have been trying to contact you either by phone or mail.  You cannot not calm ignorance.  There simply is a reason why you are paying late.  Once you have come to terms with your problem you must do whatever you can to get current.  Sell things on ebay or have a garage sale.  You need to get some cash and pay this debt.

Next, you to develop a plan to ensure you are budgeting and paying on time.  If you are in over your head with debt and you are not making enough to pay each month, you should seek some outside help, get a second job, or sell everything that is not bolted down to get yourself where you can pay down your debt.  Also, you can reach out to your creditors regarding your situation.  They might not be nice about it, but what choice do they really have.  If you defualt they will be out their revenue and this alone should make them listen.

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1. Get all of your credit cards together and list the details of them. State the balance, interest rate, minimum payment percentage and other details that are relevant.
2. On the list of your credit cards rearrange it so that the card with the highest interest rate is at the top and descends accordingly from highest to lowest.
3. Calculate the required minimum payments for all of the cards.
4. Work out how much extra money you can come up with each month to apply to your credit card debt. If there are no ways you can pay additional amounts above the minimum payment then you should work out a budget and cut any expenses.
5. Every month you should pay the minimum amount on each credit card except for the one with the highest interest rate. The one with the highest interest rate you should pay the minimum balance plus the additional amount that you can afford. This will allow you to reduce what you owe each month.
6. You should do this until the card with the highest interest rate has been paid off entirely. Now take the amount you were paying off on that credit card each month and then use it with the minimum payment on the second card until this has also been paid off, continuing to pay the minimum amounts on your others cards as well.
7. Keep repeating the process until all of your credit cards have been paid off.

There are some experts that recommend paying off the cards with the lowest interest rates first because they are easier to manage. In my opinion this is a mistake because the higher interest rate cards accumulate even more costs more quickly. This is why priority should always be given to the highest down to the lowest. By the way, do not be afraid to call your credit card companies and ask for a lower interest rate. You may be surprised at their reactions. If the company refuses to lower the interest rate then do some homework and find a new card with a lower rate of interest and transfer the balance. Lower interest rates mean that the debt is far more manageable for you and will be less stressful. If you would like more information on strategies about debt reduction then please consult an expert in your country of residence.

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Think about this.  Suppose you are paying for a service like a phone line and it only works sometimes.  A likely thought is to not pay for this poor service because it was up to your standard.  But the phone company does not see it that way and consistently tries to collect from you.  This continues to escalate and now the amount due has been sent to collections.

There is not much you can do about it.  It will be on your credit report.  The only way to tell your side of the story is to add a 100 word statement regarding this item.  You send a letter to the credit bureaus and have a statement added.

This might make you feel like you are protecting yourself but is it really doing anything for you?  The facts are your credit score is unable to take into account any 100 word statements while calculating your score.  So while you might have been trying to protect yourself from a lower credit score, there is not much you can do.

Another factor to consider is creditors often overlook these 100 word statements.  They are not interested in them and are more interest in the quantitative data.  So that leaves you with a possible statement that will hardly help your credit standing and the item still on your credit report.

There is something though about being able to tell you side.  A feeling that is being record and written down to be read.  That is a good feeling especially when you have been wronged.  Also, a creditor could read it and it is there if a potential employer would like to read it as well.  But there is no telling what the effect will be.

Sometimes it is better off than spending the time drafting and submitting a 100 word statement to work with the account to come to a settlement on the debt.  This will have a  better effect on your credit.  Also, in the meantime if you have added a 100 word statement to your credit report and now have settled the debt, you should have it removed.  It will be a sign that you have in the past had a problem with a account.

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Now, you are entitled to a free credit report once per year through AnnualCreditReport.com, but this does not include your credit score.  You will have to either pay for a credit score or enroll in a credit monitoring service.

The way it is present between the two parties, AnnualCreditReport.com and FreeCreditReport.com, gives two different sides.  Annual Credit Report is almost stating don’t do these other guys, it isn’t worth it because it will have strings attached and you will get it for free from us.  FreeCreditReport.com has the position that you will get a free credit report and score if you enroll in our credit monitoring program, but we will hardly talk about triple advantage and what it really does.  We will instead stress the fact that you get a free credit report and score if you join.

So which is the better stance?

The full story should actually be told.  Credit monitoring is actually a worth wild product, but selling it using a free credit report and score is the industry norm.  Most every credit monitoring program you will find out there offers a free credit report and score to get you to sign up.  AnnualCreditReport.com is just confronting the most recognizable.

Also, as stated above a credit report is free, but a credit score is not.  A “free credit score” always will come with some strings attached.  These strings are signing up for a credit monitoring program.

Here is the consideration that must be made: If you are person concern about your credit, credit reports, credit scores, being protected from identity theft, and trying to improve your credit, credit monitoring is worth it.  If so you will want to check your credit report and credit score more than once per year.  Taking that into account the cheapest way and the best way to do this is credit monitoring.  Depending on the program, you will be given access a certain number of times to both your credit report and score.

Also, on the push to improve, many credit monitoring are going to give you assistance by analying your credit report to see what you can do to improve.  Many programs provide alerts to when changes are made to your credit report.  Also, some watch your score and alert you when you hit your credit score goal.

Identity theft is another reason why credit monitoring is worth it.  Millions of Americans each year are struck by this crime.   The average money per person lost is around $5,000.  Also, the time and effort needed to clean up your credit report is daunting.  Credit monitoring is a form of prevention.  They watch your credit report 24/7 365 days a year.  Also, most programs come with a form of identity theft insurance.

Conclusion

Maybe the choice needs to be made to sell credit monitoring for what it is.  For a person that wants to check their credit report and score more than once per year.  Also, a person who is concerned about their credit, wants to improve their credit standing, and does not want to be a victim of identity theft.  Selling the product biased on its real benefits not a bonus of getting a free credit report and score when you sign up.  This would more than likely not sell as well, but consumers might known what they are getting into from the beginning.

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