Credit history and Scores Generally Confuse Consumers
Most individuals who are of an age to care about their credit know that the three main credit agencies, Experian, Trans Union and Equifax, keep credit history on them. The reporting agencies continue to keep track of loans, credit cards and personal bankruptcies and make note of whether each consumer pays his or her bills in a timely manner. Most individuals are also aware that their credit ranking is also readily available in the form of a credit score, which is, basically, their overall credit worthiness distilled to a three-digit number.
Moreover, many people have, at best, a hazy understanding about how their financial transactions are viewed by the credit agencies. There are numerous myths and misconceptions about credit reports and credit scores and how they are affected by things individuals do financially. Here are a number of good examples of these popular misconceptions:
A consumer has only one credit score – Not true. Each agency keeps track of financial transactions separately from the others and may have more or less information to work with than the other credit reporting agencies. Plus, until recently, each agency used their own scoring system. In all probability, if a consumer were to contact each agency to obtain his or her credit score, the result might be three totally different numbers.
Your salary affects your credit score – Your score is simply a representation of how well you handle the credit available to you. If you earn more cash, you might have more accessible credit, or not. Either way, the score is simply a reflection of what kind of credit you have and whether you pay your bills on time. How much you earn is not part of the equation.
Eliminating a charge card boosts your credit score – Not necessarily true. Credit agencies examine how much of your accessible credit you are making use of. Less is more; the bureaus like to see that you are making use of as little of your readily available credit as possible. If you owe a lot of cash on charge cards and you terminate an abandoned account, it may look like you’re using a larger portion of your readily available credit. That will literally raise your score!
Marriage merges credit history – Your credit rating is your own. That will not change in the event that you get married. Jointly borrowed money will show up on both reports and will affect both of your scores. And just as marriage does not merge the reports, divorce won’t separate the joint items. If you get divorced and your ex does not pay on your joint loans, your score will decrease.
The process of compiling credit scores is a complicated one. It’s understandable that many individuals don’t entirely understand how the system works. Possibly the best way to continue to keep tabs on what is going on with your own finances is to check your credit history regularly. You can get a copy of your credit report at AnnualCreditReport.com.
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