Poor Credit Credit Card – Credit history and Scores Generally Confuse Consumers
Most people who are of an age to care about their credit realize that the three primary credit bureaus, Experian, Trans Union and Equifax, keep credit history on them. The bureaus keep track of loans, bank cards and personal bankruptcies and make note of whether each consumer pays his or her bills on time. Most people are also aware that their credit ranking is also readily available in the form of a FICO score, which is, in essence, their overall credit worthiness distilled to a three-digit number.
Beyond that, many people have, at best, a vague understanding about how their monetary transactions are viewed by the credit bureaus. There are numerous myths and misconceptions about credit history and credit scores and how they are impacted by things people do financially. Here are a few examples of these popular misconceptions:
A consumer has only one credit score – Not true. Each bureau keeps track of monetary transactions separately from the others and may have more or less information to work with than the other credit reporting agencies. Plus, until recently, each agency used their own scoring system. In all likelihood, if a consumer were to contact each agency to obtain his or her credit score, the result could be three totally different numbers.
Your salary affects your credit score – Your score is simply a reflection of how well you handle the credit available to you. If you earn more money, you might have more readily available credit, or not. Either way, the score is just a representation of what type of credit you have and whether you repay your bills promptly. How much you earn isn’t part of the formula.
Canceling a bank card raises your credit score – Not necessarily true. Credit bureaus look at how much of your available credit you’re making use of. Less is more; the agencies like to see that you’re using as little of your available credit as possible. If you owe a lot of money on bank cards and you cancel an abandoned account, it may look like you are making use of a larger portion of your accessible credit. That will actually raise your score!
Marriage merges credit reports – Your credit rating is your own. That will not change in the event that you get married. Jointly borrowed money will show up on both reports and will affect both of your scores. And just as marriage does not merge the reports, divorce will not separate the joint items. If you get divorced and your ex does not pay on your joint loans, your score will decrease.
The process of compiling credit scores is a complicated one. It is understandable that many individuals don’t completely understand how the technique works. Possibly the ideal way to continue to keep an eye on what is going on with your own finances is to check your credit score on a regular basis. You can get a copy of your credit report at AnnualCreditReport.com.