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7 Credit Myths and Truths From Credit Reports to Credit Scores

, by Rob Kaufman

Today's goal: To debunk credit myths with credit facts - especially when it comes to your FICO® Scores.

When you hear or read something about credit or finance, how can you know it's true? How can you be sure it's not a credit myth - something someone is merely passing along without verifying its accuracy, or which a person conceives just to look intelligent or to sell you a product you really don't need?

Today we'll try to help lessen the amount of research you may otherwise have to do by pointing out some common credit myths and falsehoods. These are statements you might have thought were facts, until today. Let's start with...

Paying off debt immediately removes that debt from your credit report.   __ ** __

__ ** __ __ MYTH __

Your credit report reflects your credit history, which includes all of your accounts and their associated payment statuses - both on-time and late payments. Since late payments, collection accounts, discharges and bankruptcies stay on your credit report for 7-10 years, simply paying off a debt will not immediately remove it from your report.Every time your credit report is pulled, your credit score decreases.

Every time your credit report is pulled, your credit score decreases.

__ MYTH __

When your credit report is "pulled" it's classified as either a "hard" or "soft" inquiry. A hard inquiry occurs when you've taken an action (i.e., applied for credit) and a lender pulls your credit report in order to review your credit. This type of inquiry can affect your credit scores. A soft inquiry occurs when you check your own credit or a lender sending you a "pre-approved" credit offer pulls your credit. This type of inquiry does not affect your credit.

You should check your credit report at least twice a year.

__ FACT __

Your credit report can change every single day. Items will appear on your report because of actions you've taken, although some may show up due to an error made by someone else. Since these changes can affect your FICO® Scores and chances of getting a loan or the terms of the loan you receive, it's important to monitor your credit as often as possible.

The credit reports from each of the three major credit bureaus could be different.

__ FACT __

Not all of your accounts/lenders will report to all three major credit reporting bureaus, which means, for example, two bureaus could include a certain revolving account in their reports while another may not. Also, accounts on your credit reports may not always be updated on the same day so the bureaus' reporting with respect to each other can vary at any given point in time.

The best way to improve your credit score is to pay off and close all your accounts.

__ FACT __ and __ MYTH __

There's no doubt that you can improve your credit score by paying off debt. However, closing all of your accounts can actually lower your score. When calculating credit scores, one crucial factor is a number of total balances compared to a number of total credit limits. When you close accounts, some of the available credit limits are removed which make the balances appear to be higher compared to the overall limits - and that could lower your score.

As long as one spouse has good credit, low-interest loans will be easy to get.

__ MYTH __

Although every person has his or her own individual credit reports and scores, a spouse with poor credit can affect a couple's ability to get credit or receive favorable credit terms. Let's say one spouse can't qualify for credit on his or her own, and the couple wants to apply for a joint account or become co-signers on a mortgage. If one spouse has a bad credit history, the couple might have to pay higher interest rates, additional fees or face being denied.

Regarding credit and finances: Don't believe everything you see or hear.

__ FACT __

As with many other subjects, when it comes to credit, you can't always trust the information you come across. If you're ever unsure and want to learn more, you can always visit the myFICO website. It's full of information, advice and tools that are designed to help you find the truth on credit-related matters.

Every day, thousands of people visit myFICO to help them find answers they're looking for on topics related to credit and finances. And that's a fact.

There are others, just like you, who are unsure if something they read is a credit fact or a credit myth. See their questions in the myFICO forums .

Rob Kaufman

Rob is a writer... of blogs, books and business. His financial investment experience combined with a long background in marketing credit protection services provides a source of information that helps fill the gaps on one's journey toward financial well-being. His goal is simple: The more people he can help, the better.