Credit Score Facts and Myths

There are a lot of questions about credit scores, and it’s not always easy to know where to find the answers. When you do find answers, it’s hard to know whether or not they are the right ones. Here are some basic credit score facts to help you separate the truth from the fiction when it comes to credit scores.

Myth: Credit Scores Are All Alike

Credit Score Fact #1: All Scores Aren’t the Same

There are hundreds of scoring models used to calculate credit scores. Credit scores can be calculated specifically for the industry in which you are applying for credit. For example car dealers may use a different credit score than a credit card company. There are several brands of credit scores, but in the end what matters is that yours gives a good, accurate impression of your borrowing power.

Myth: Credit Scores Tend to Remain Stable

Credit Score Fact #2: Your Credit Score Is Constantly Updated

Every time there is activity regarding your credit, a new loan, an application for a credit card or your creditors reporting your account to the bureaus, your credit score may be affected. The only way to know whether or not this is happening is to either order your credit score or set up credit monitoring to alert you when there has been a change.

Myth: If something happens to my credit without my permission, credit bureaus will alert me

Credit Score Fact #3: Credit bureaus have no way of knowing whether the activity on your report is legitimate or not

When a lender reports activity to the credit bureau, they are doing it under the assumption that the activity is legitimate. The only way you’ll know if something unauthorized is happening, without reviewing your credit report, is if you attempt to get credit and can’t. At which point you have the right to a free credit report from the bureau which the lender used to make their decision. An appealing alternative is to sign-up for credit monitoring. With this service you get access to your credit report whenever you need it and email alerts letting you know if there has been a significant change in your report or score.

Myth: Credit Scores Are Irrelevant

Credit Score Fact #4: Your Credit Score Is a Big Factor in Whether You Get a Loan With Good Terms

Lenders will probably look at your whole credit report to understand what to expect from a relationship with you, but credit scores were created to represent all that information in one easily accessible number. Lenders use your credit score to assign you to a risk category. If your credit score is too low, they may reject your application, while if it’s very high, you may instantly qualify for a preferred interest rate. This is why it is so important to monitor your credit score and make sure it is as high as can be.

Myth: If My Credit Score Is Low There Isn’t Much I Can Do About It

Credit Score Fact #5: You Can Change Your Credit Score

Not only can you change it, but you can change it quickly. As soon as you start making sure all payments are being made on time, lowering your monthly balances and getting rid of unneeded credit cards, your score will improve. Again, the only way you’ll know this is if you are monitoring it or have access to your report, which is why it is crucial that you make sure you have this kind of access.