Credit Myths: 1) Paying off debt will add 50 points to my credit score Fact: While we may with this to be true, your credit score is calculated using a com- plex equation taking into account hundreds of factors and values. It is difficult if not impossible to predict how many points you can gain by changing one factor. 2) A cosigner is not responsible for the debt Fact: You are being asked to guarantee this debt. If the borrower does not pay the debt, you are responsible for paying it. 3) Once you pay off a negative record it is removed from your report Fact: Negative records such as collection accounts, bankruptcies, and late payments will remain on your credit reports for 7-10 years. Paying off the account before the end of the set term does not remove it from your credit report, but will cause the account to be marked “paid”. 4) Closing accounts is a good idea Fact: Many people advocate closing old and inactive accounts as a means of manag- ing their credit. But they should think twice before closing the oldest account on their credit reports. Canceling old credit accounts can lower a credit score by making the credit history appear shorter. If you want to reduce your levels of available credit, ask for your credit limits to be lowered or close newer accounts instead. 5) Cancelling credit cards will boost your score Fact: Your individual situation will determine whether cancelling a credit card will improve your credit score. Our general advice is to keep your oldest credit card account open, keep your balances low in relation to your available credit limit, and cancel any under used extra credit cards which may tempt you to over- spend.
Posted on: Thu, 21 Nov 2013 19:12:52 +0000
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