Financially Tough » Credit Myths http://www.financiallytough.com Getting Tough With Your Money Thu, 24 Jun 2010 06:51:18 +0000 en hourly 1 http://wordpress.org/?v=3.0 Credit Score Myths http://www.financiallytough.com/credit-score-myths http://www.financiallytough.com/credit-score-myths#comments Sun, 08 Mar 2009 20:06:23 +0000 http://www.financiallytough.com/?p=56
  • A Couple FICO Score Myths Debunked They is a ton of advice out there on how...
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    Credit Score Myth 1: Closing Old Accounts Will Improve Your Credit Score

    One Credit score myth that people often believe that you can improve your credit score by closing old accounts.  The truth is the usually the opposite.  There are two ways it could actually hurt your credit score.  First, is your credit score utilization which makes up 30% of your credit score.  This is calculated by dividing your account balances by your credit limits.  Since you will have less of a total credit limit you will be dividing by less.  This will cause your credit score utilization to rise.  Since the lower the utilization the better for your credit score you have just done the opposite.

    Second is your credit score wants a long credit history.  This makes up 15% of your credit score.  Your credit history takes into account the average age of all your accounts and the age of your oldest account.  Usually when individuals close accounts it is an old account that they no longer use.  This could hurt your average account age.  Also, if you don’t know which is your oldest account, you could wind up closing that one.  This will definitely hurt your credit score

    Credit Score Myth 2: Lowering Limits Will Improve Your Credit Score

    This is another thing individuals think they can do to improve thier credit score.  The truth is it has the same effect as closing an account for your credit utilization.  It will cause the utilization percent to rise.  And this could hurt your credit score

    Credit Score Myth 3: Shopping Around For New Credit Will Hurt Your Score

    The answer to this credit score myth is yes and no.  That is becuase your credit score allows you to shop for some credit and not for others.  You are allowed to shop for mortgages and auto loans, but not credit cards.  That is becuase these are recognized as large puchase that smart consumers shop for.  Credit cards on the other hand are a one time deal.  You have to select the one you want before applying for ten.  Doing this with credit cards will hurt your score.

    There are many other credit score myths and I will try to post some others.

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