Beware of the many who claim to be credit experts. Here are the most common credit myths…
Checking your own credit report may damage it – The FICO formula does not penalize consumers for pulling their own reports. After all, how else could you verify their accuracy? Request your credit reports at least once a year.
Don’t shop around – If you visit five car dealers and each pulls your credit report, don’t worry. The FICO formula lumps together auto and mortgage inquiries that occur within 30 days. In other words, five auto-loan applications in a month count as one inquiry.
You can get a good score without using credit – While striving for a debt-free life may be admirable, lenders want to see evidence of your ability to use credit responsibly over time. Use your credit card, even if you pay off the balance every month.
Credit counseling raises a red flag – Your credit report will not suffer if you seek advice from a credit counselor. The story is different, however, if you enroll in a debt-management plan for which a counselor has negotiated lower interest rates or if you consolidate your debts into one payment. Many lenders view payment plans negatively.
Bankruptcy is a credit-killer – Bankruptcy is indeed the worst mark that can appear on your credit report. It stays on the report for 10 years. But that doesn’t mean you can’t get credit again. Some consumers obtain credit six months after their cases have been discharged. However, they do pay steep interest rates.