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“Myth-Conceptions” of Credit

by Carla Griffin on October 10, 2011

The media, newspapers, internet are full of incorrect information regarding Credit. One of the things that I want to make available to your clients, family and friends, and everyone else whose  financial lives that you touch, are certain facts about credit that will affect them and any financial decision that they have made or about to make.

MYTH #1 You share a credit score with your spouse. Untrue! Your spouse and your credit report and credit scores are looked at individually. It is based on your social security number which is unique to you. If you get an authorized user account (also known  as “piggybacking”) for your spouse, that will also show up on the report. However if none of your accounts are joint, and you don’t have any authorized user accounts, there will be nothing that will affect your individual score.

MYTH # 2: Your credit score only counts when you’re looking to borrow money. HUGE Myth! Your credit score, right now, is looked at for almost everything you do. When you are applying for a job, auto insurance, homeowners insurance, life insurance, contractors bond, they look at your credit score, they look at your credit history. That’s why it’s so important to monitor your credit and clean it up if needed.

MYTH # 3: Always pay your credit card balance in full and that will give you the best credit. The problem is if you have no balance and you pay it in full every month you will have no payment history. You will want to leave a small balance every month (Ideal amount is 1%) to show that you can pay on time. Don’t just pay off a balance and leave it as a zero balance account ongoing, because after six months it is typically looked at as an inactive account, (which can also be closed due to inactivity) which gives you really no major positive. Where if you use the account every few months, and leave a very small balance on it, then it will help you.

MYTH  # 4: Too many accounts will hurt, therefore you must close accounts. This is a HUGE myth!15% percent of your score is based on the average age of your accounts. Fact, the OLDER the revolving account the  BETTER! This does not mean run out and open several new accounts..It is also a good idea to carry a small balance to keep the accounts open.

MYTH # 5: My mortgage broker can use the credit report that I obtained from online. The “FREE” annual  credit report is weighted differently than a lender’s credit report, and does not contain the same data that a lender report does. From a lenders perspective, there are reports where different factors weigh diffrently.A mortgage lender can and will customize the FICO/FCRA model based on what their requirements are. An automotive lender will get a automotive based  score. More weight  is put on your auto credit than anything else in your score for the auto dealer. A credit card company is going to be more concerned with how timely you are with your credit card payments to decide if they will offer you credit or allow a credit limit increase on a existing line of credit.

MYTH # 5: My mortgage broker can use the credit report that I obtained from online. The “FREE” annual  credit report is weighted differently than a lender’s credit report, and does not contain the same data that a lender report does. From a lenders perspective, there are reports where different factors weigh diffrently.A mortgage lender can and will customize the FICO/FCRA model based on what their requirements are. An automotive lender will get a automotive based  score. More weight  is put on your auto credit than anything else in your score for the auto dealer. A credit card company is going to be more concerned with how timely you are with your credit card payments to decide if they will offer you credit or allow a credit limit increase on a existing line of credit.

REPOSTED with permission:

By, Julie Macc  Certified Credit and Identity Theft Specialist

Legal Consultant of behalf of Century Law Group LLP

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