No one knows how credit score myths about fico score ratings get started. Lenders can sometimes give you poor advice and that makes it hard to know what to believe.
But no matter where you get this bad advice from, credit score myths can cost you money and even keep you from getting the best loans.
Fico score ratings are used in most all lending and knowing what a credit score myth is or what will help your credit score points is valuable information.
Here are some of the most common credit score myths.
Checking your credit report will hurt your credit score
Checking your own credit report or credit score does not lower your score and is one of the most common credit score myths. This is called a soft inquiry because you are requesting your own report.
However, it is not a credit score myth if a lender is checking your credit report. This is a hard inquiry and will knock off about 5 credit score points.
Another credit score myth is the credit score rating system treats multiple inquiries from the same type of credit inquiry in a 14-day period as just one inquiry.
The system ignores all inquiries made within 30 days prior to the day the credit score is computed. So if you want to minimize the damage from credit inquiries, shop for a loan in that short period of time.
Closing old accounts will improve your credit report score
Sometimes even lenders create this credit score myth by telling you to close your old and inactive accounts to improve credit report score. Canceling old credit accounts can actually lower your credit score because it makes your credit history appear shorter.
If you want to reduce your levels of available credit, it’s better to close newer accounts instead. What hurts your score more than older accounts is applying for new credit.
Check more than just FICO score rating
If you ever hear this credit score myth from anyone, consider it a red flag. All three major credit reporting bureaus offer FICO credit score ratings using the formula developed by Fair, Isaac.
But each of the three major credit bureaus, Experian, Trans Union and Equifax will report three different scores because they don’t all share the same data.
Examine your credit reports from all three major credit reporting bureaus and fix any errors before you apply for a loan.
Credit counseling hurts your FICO score rating
This is also a credit score myth because the current FICO credit score rating system ignores any reference to credit counseling.
However, any late payments you’ve had with creditors will hurt your credit score. Credit counseling can hurt your ability to get a loan with some lenders because you probably have had trouble paying creditors.
Paying your bills on time and paying down credit card debt is by far the best way to improve your credit report score. Check your credit report regularly for any errors and don’t fall for these common credit score myths.