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Common Credit Myths...by Austin the Realtor
Hello my good people. Today we will discuss your credit. To make just about any large purchase, your credit will be a factor. Unless you are buying using only cash, buying a new home, a car or even furniture will entail some credit review when a loan is requested. Many guard their credit with their life; others don’t feel it’s that important. To clear the air, if you want to spend the least amount to borrow money, it is very important to understand how credit works. You control what goes into your report, so it’s wise to think twice about opening that 6th department store credit card. I read a few articles and I want to talk today about some misconceptions some have about our credit report.
Myth #1. Too many inquiries will hurt my score.
This is not totally accurate. You as the consumer can check your score every day if you choose, and this will have no effect on your score. However, when you give permission to a lender to access your credit report, this can affect your score. This is considered a hard inquiry. The good thing is the credit agencies are aware you may be shopping for a mortgage or a car loan, so if there are multiple inquiries in 30 days, they will count this as 1 hard inquiry.
Myth #2. If a debt in arrears is paid off in full, the missed payments will be removed from my report.
This would be great if it was true. The credit company will be thankful to have you off their books - but your history stays. It takes up to seven years to have one missed payment disappear from your credit report. If you file for Chapter 7 bankruptcy, this can take up to 7 years. Although you can dispute erroneous entries to have them removed, a valid negative entry will stay even if a credit repair company says they can get it removed.
Myth #3. When you get married, your credit report merges.
Thank goodness this one is not true. There would be a lot less marriages! Once you marry, your debt is still your debt. It's common practice to start opening credit cards together or applying for loans together, and this will appear on both reports. Both individuals will be equally responsible for the debt. Even in a divorce, unless the creditor agrees to remove one of the individuals, you are both still on the hook. The only time marriage gets you hooked is if you live in a community property state which will hold both spouses liable. States such as Idaho, California, Arizona, Nevada, Texas, Wisconsin, Louisiana and Washington are community property states - so be careful!
Myth #4. I’m never late on my bills and my credit score is good, so I don’t have to check.
Although you may never be late does not mean the information being reported is correct. It's always good practice to check your report at least 2 times a year to ensure no erroneous information has been posted. You don’t want t to find out there is an error on your report when you are applying for a mortgage or car loan. You may not be happy with the rate you qualify for - if you qualify at all.
One Final Note: They advertise free credit reports all the time. This is true. You can get your report for free - but your score is not free. The site: www.myfico.com can provide your score for about $20. It's good to have both - so don’t get upset when you get your report and your score is “missing”!