Five Myths That Affect Credit Scores

Uplifting credit score – Isn’t it a perfect and well thought of resolution for the New Year?

Yes - We are well aware of the importance of the grades in our financial life, which influences many things. Hence, it is necessary that it should be carefully managed. But it is really important that we should get rid of the myths that prevent us from having spotless credit report.

Here are five myths that have to be thrashed this year.

1. Reviewing my credit history will hinder my credit score.

Inquiries have impact on credit grade but only those for which you have applied credit in past two years. Inquiries of such type are recognized as “hard inquiries” leaving huge impact over the credit history. Once you attain free credit report then you may acquire several types of inquiries. You will also see pre-approved inquiries, which are basically from companies with your contact information for marketing purposes and mailing you credit card offers, which will also be listed on your credit report. But it does not have negative impact on your score.

2. Closing unused credit card is a smart thing.

Believe it or not, but canceling credit card lowers the grade. Closing a credit card which is no longer in use can be good money management decision. Utilization ratio has impact over credit score and also the amount of available credit limits. For instance, if there are two credit cards and each with $5,000 limit. 20 percent or $1,000 balance on each one is desirable but the scores are affected when you close one card and transfer it to the other. Doing this you will load the other card with $2,000 on your $5,000 and utilization will reach up to 40 percent which is bad for the credit score.

3. Loading balance on credit card is better than paying it off each month.

Your credit history does not reflect that you pay every month. Lenders can only come to know about the date and balance on the card when the information was submitted to the credit-reporting agency. Regular activity on the card including making purchases and paying on time every month has good effect on the credit history.

Apart from taking care of these aforementioned facts, one should also invest great dedication on paying the balance on time and this will enhance the credit score. Also another fact which you should be aware of is that negative information looses its vitality with the passage of time. Though some negative information on the credit statement remains alive for years, but you will credit check to realize that on time payments is enhancing your score