Credit Score Myths
1. Paying off installment loans early will increase your credit score in San Diego.
Mr Credit: This isn’t true in most cases. By paying off an installment loan early, you are not doing anything that will be positively viewed by the scoring model and you might be hurting yourself by eliminating an active account from your repoort.
2. Closing my credit card accounts after I pay them off is the right thing to do.
Mr Credit: Just think of it like this… you don’t stand to gain anything with regard to your credit score in San Diego by closing an account. Paying off your credit cards is great, but by closing them, you can negate this goodness with a swiftness.
3. I should pay off any collections that are on my credit report.
Mr Credit: Speaking from a credit scoring perspective only, you should not do this. It can cause your scores to drop drastically. When the activity on that account updates from the payment you made, the scoring model will think it’s a brand new collection account on your report causing you to lose anywhere from 50 to 150 points on your score. If you have collections on your report and want to know what to do, consult me immediately.
4. I don’t want to get an inquiry on my credit because I know it will cost me x number of points.
Mr Credit: While you do not want to get an inquiry unless you have to, there are a lot of circumstances where it will not hurt your credit score. The scoring model looks at the last 12 months of inquiries, although a lot of credit reports will show the last 24 months. If you have less than 4 in the last 12 months, you may not be losing any points on your score at all. From there, you just want to have as few as possible. There are several theories I’ve had in the past about inquiries that seemed to hold true for a period of time, but we ultimately disproved them all. Also, for San Diego Mortgage and Auto Inquiries, you are not supposed to be penalized more than 1 inquiry for any inquiries you have in a 45-day window. I have seen this not hold true recently. I strongly recommend not getting any inquiry unless you absolutely must.
5. Bankruptcy will ruin your credit for 10 years.
Mr Credit: If done properly, the majority of folks will see their credit scores increase within a few months of the discharge of their Bankruptcy. This is of course assuming that there are no errors on your report as a result of the Bankruptcy, which is unfortunately, extremely unlikely. Don’t forget, you don’t have to be late on your payments to file for Bankruptcy! It’s entirely possible to maintain 700 credit scores just a few months after your Bankruptcy is over with!
6. Every Credit Report site and Credit Bureau are the same.
Mr Credit: I hear something similar to this every week. The reality is, there are a bunch of different scoring models for viewing credit. Some are for a San Diego Auto Loan, some for Credit Card applications… While most talk of credit scoring relates to the Classic Fico model, it’s certainly not the only one that exists. The Bureaus are very separate. In fact, they go out of their way not to share information with one another. Just another reason why 9/10 credit reports have errors on them…
7. That account isn’t my responsibility. It was awarded to my Husband/Wife in our Divorce Decree!
Mr Credit: Yes, it is no longer your responsibility to pay that debt in the eyes of the court, but the Bureaus/Creditors don’t care about that. If you signed your name to acquire credit, then you’re on the hook for it no matter what anybody says. I can’t tell you how many times I have seen this burn folks.
8. I’m going to co-sign for my daughters friend because ultimately, I’m just a co-signer and that can’t hurt me.
Mr Credit: WRONG. The reason they need a co-signer in the first place is because it’s necessary to have someone with reasonable credit to come after if payments aren’t made. Here’s the best advice you’ll ever get… Don’t EVER co-sign for ANYONE. Trust me, it’s not worth it.
9. I always pay for my cars in cash. That should look really good on my credit.
Mr Credit: Incorrect. If you’re paying for something in cash, it will never even be reported to credit! Not to mention, you want to have an auto loan on your report. For “Mix of Credit”, which is 10% of the score, an auto loan is required to receive maximum points. It’s always a good idea to have open accounts in positive standing. Get an auto loan! Even if it’s a small one, you will still get the credit!
10. This negative stuff on my report will “fall off” after 7 years, so I don’t need to worry about it now…
Mr Credit: Wrong! Although it is possible and we do see it, an item “falling off” of your credit report would be the exception and not the rule. Keep in mind that the reason this doesn’t happen as it’s supposed to is because of the manipulation of your account dates by the Creditors. Especially with collections, since they know the best chance to collect is now vs. later. One of the reasons we end up removing a lot of collections from our Clients’ credit reports is because of how inaccurately they are reported. Not to mention, the 7 year clock for a negative item to report actually starts ticking at the first moment the original account becomes “seriously delinquent”. Since this date isn’t recorded for easy access, we have to investigate the account to determine it in most cases.
Contact Mr Credit San Diego to learn more about your Credit Score!