12 Credit Myths That Will Cost You Your Credit Scores And Thousands of $$$$ - mycreditdoc.com

12 Credit Myths That Will Cost You Your Credit Scores And Thousands of $$$$

12 harmful credit mythsUnfortunately there are a lot of misconceptions about credit and getting the wrong advice can cost you precious points in your credit score and money from your bank account.

We have compiled the main credit myths and correct answers to help you avoid these 12 common credit misconceptions:


1. You should close all your unused credit cards.

close credit cardsFalse. The majority of the time this is untrue and can cost you dearly. The issue with this “myth” is when you only have 1-5 accounts and you close all or most of them, you have little to no credit you can use.

This is important because the lenders want to see that you have credit available but are responsible enough not to use it all. Because of this, the FICO scoring model can reduce your credit score if you close out all, or most of your accounts.

If you have too many accounts open, the creditors see that as a risk also. That is because you theoretically have the ability to charge numerous cards all at the same time and then bail on them.


2. Divorce will absolve you of your credit responsibilities.

Divorce Decree and creditThis depends on your divorce decree in some states, but the majority of the time, if your name is on the credit report, it doesn’t matter. You are still legally obligated to it until you have your name removed from the account. Scary right? That means if the divorce decree says your souse is responsible for a debt, but you are both on the loan papers, the creditors can harass you for the payment if your spouse misses a payment. It will also show as a missed payment on your credit report.  Learn more about this on the government’s FTC Credit and Divorce Section


3. All of your credit reports and credit scores will be the same.

credit reports

You guessed it… this is false! It’s not unusual for reports to differ from bureau to bureau. Many creditors only report to one or two of the three main credit bureaus. If an account does not show up on one of the three credit reports, the report missing that account may have a different credit score than the other two. So don’t expect them to perfectly match up like identical twins!

If the account is in good standing then having it missing on that report can hurt you. Now if it is a negative account, having it missing from 1 of the 3 reports can help that credit score! That is why many people have 3 credit scores that vary greatly from one another.


4. Debit Cards can help your credit reports and scores.

debit cardUnlikely. Most check cards have no effect on your credit standing. Check cards or ATM cards with Visa or MasterCard logos work as credit cards but are rarely reported to the credit reporting agencies.

If you want a secured loan or credit card to build up your credit, don’t be fooled into thinking your debit card will do it. There are a few good resources for getting new credit to build up your score. We have reviewed the best credit card and loan options on our credit resources page you can visit here.


5. Hiding your credit card balances by moving them from card to card keeps creditors blindfolded.

This is incorrect. Moving money from account to account (balance transfers) does not keep the information hidden. Some people move balances from one card to the other to hide their debt but this does not work.  Unfortunately sometime balances are moved from one account to the other to help pay the bills.  In the Credit Repair Doctor® we provide a budget guide to help remove the vicious cycle of living paycheck-to-paycheck and help you become debt free.

Many of your lenders are allowed to access your credit report periodically without your consent.  It is called a “soft inquiry” and does not show up as a regular inquiry on your credit report. It also has no impact on your credit scores.


6. Paying cash for everything will help your credit rating.

paying with cashUsing cash for your transactions does not have an effect on your credit (other than you are not using your cards). Not using any credit can have a negative effect on your credit. You need to show lenders that you can use credit and also be responsible with it.

You never know when you’ll need a car loan or even something as simple as getting approved for a cell phone or utility (satellite, cable, internet, etc). Having accounts open and used, shows the lender that you currently use your credit responsibly.


7. Making a lot of money will improve your credit report and scores.bank account does not impact credit

This is incorrect. Income is not a factor in your credit rating therefore your credit scores will have no impact by how much you make. It is not uncommon for people with high incomes to have low credit scores, and many people with lower incomes have high credit scores.

The amount you have in the bank or investments has no impact on your credit either.


8. I’ve never missed a payment so I have great credit scores.

On-time payments obviously  impact your credit scores but there are many other factors involved too. Payment history accounts for 35% of your credit score.

There are also many other factors in calculating the 65% of your credit scores like credit utilization, new credit, length of credit, etc.

Credit utilization is worth 30% and if you charge a balance of more than a 1/3 of your total credit limit, it can hurt your credit scores.  The length of your credit history, number of accounts and type of accounts all impact your credit scores.


9. If you have poor credit then your credit scores will suffer for seven years.suffering from bad credit

There really is no specific time frame for assembling credit information. The seven year “rule” pertains to a certain types of debts.

If they are negative items that are misreporting with incorrect or misleading information, it is YOUR legal right to dispute and delete them. With the right knowledge, you can remove those inaccurate, incomplete or unverifiable items.


10. Paying off late payments, collections and tax liens will remove them from your credit report.

erase accounts from credit reportSimply paying off a tax lien, collection or other late payment does not remove them from your credit. In some cases paying an old debt  can RESTART THE CLOCK on the statute of limitations. That’s where the creditor was past the time frame where they could sue you but by making a payment, you now gave them the legal ability to sue you again!

If you are considering paying an old collection or charge off, you might be able to negotiate a lower amount and create an agreement with the creditor. With the Credit Repair Doctor® we teach you how to negotiate your debt down and get the creditor to delete the listing from your credit report by arranging a pay-for deletion agreement.


11. You should delete every negative account you can find.

delete account buttonAbsolutely NOT… If you have an account that had some derogatory information in the past but also has a lengthy history, then your new average age of accounts will be significantly lower. So you have to be very careful when selecting which accounts to delete.

This is a huge mistake that credit repair companies make all of the time. They just go after deleting everything they can. Then they might leave you with very little to no credit. Don’t let yourself fall into this counterproductive thinking. We show you how to determine which accounts to leave alone in the Credit Repair Doctor®.

We know of people who have gotten into a WORSE situations from uneducated or shady credit repair companies. Don’t let this happen to you: it happens more often than you would think.


12. When disputing, it’s best to just say… “The account is not mine!”

account is not mine can be wrong wayDon’t do this!!! Many credit repair companies will advocate this, but this can be illegal.

There are many other ways to do this correctly and in a more effective manner. You can easily find an inaccurate, incomplete or unverifiable item on your report and dispute it that way. FYI – The credit reporting agency has to be able to verify the account on your report, otherwise they have to delete it!


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