Common Credit Score Myths
Are you guilty of believing some of the following myths:
I must have a high credit score because I’m never late paying my bills
Yes, it’s important to be current in paying your bills - but a good payment history only comprises 35 percent of your overall credit score. The other factors taken into consideration when determining your overall credit score are: the amount of debt you owe (30%), credit history length (15%), number of open credit accounts (10%), and available credit types (10%).
My score will go up if I consolidate my credit cards
Yes, it is easier to pay down debt when you consolidate your credit cards, but your credit score could take a hit if you consolidate to fewer accounts with balances that are closer to the maximum available credit. You are considered a lower risk if you have multiple credit accounts, maintain current, and keep balances 25% - 35% of the maximum credit balance.
I can’t have a low score because I don’t even have any credit cards
Your credit score doesn’t care about how much you’re worth— your past borrowing history is what matters most in determining your credit score. If you have a poor or non-existent borrowing history with multiple creditors - your fico score will be lower.
It’s better to close my credit card accounts as opposed to keeping them open
Remember how a good payment history makes up 35% of your overall FICO score? If you close an account that has a positive payment history, your fico score will take a hit.
These are a few of the most common credit score myths out there. Don’t believe the hype when you’re trying to raise credit score.
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Need a Quick Bump in Credit? Consider Rapid Rescoring
Let’s say you’re out shopping for a mortgage loan and you’re a few points shy of qualifying for a better rate. Don’t settle for the higher interest rate - you could probably qualify for the lower interest rate by using a rapid rescore to raise your credit score.
Rapid rescoring works by going through a lender (unfortunately this service is not available to consumers) to correct errors / or account for new, positive information in your credit report. This can result in huge savings on credit card payments, mortgage payments etc. Technically you’re supposed to be able to do this on your own, but this can take months. Lenders (e.g mortgage brokers) have relationships with the credit bureaus, and for a fee they can usually have a live person at the bureau working with them to correct errors. This can result in a credit score increase in a matter of days vs. months if you tried to fix errors on your own.
Rapid rescoring won’t clear up all the errors on your credit report, but the few additional points you can gain in as much as a week could mean the difference in hundreds in savings per month on a mortgage.
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