Know the common myths related to your credit report

Today the consumers have been really informed and vast majority of them are also aware about the credit report system or even their own credit scores. However it is astonishing to know that the there are some myths that people believe in connection to their credit reports. Some of the common ones are mentioned below:

Checking your credit report hurts your credit score

Often it has been believed that checking your own credit report and credit score will put a negative impact on your credit score. However the fact is that a soft inquiry does not go against your score. On the other hand, if anyone else like a lender or credit card company is checking your credit report, then this is considered as a hard inquiry and normally it take off about 5 credit points from your score. Moreover one should know that multiple inquiries in a 14 days period are just treated as just one inquiry in the credit score rating system. Also the system ignores all inquiries made within 30 days before the day when the credit score is computed. Therefore if you want to minimize the damage on your credit score through credit inquiries then try shopping for a loan within 14 days period.

Closing old accounts and canceling credit cards improves your credit report score

This is a very common myth because sometimes even your lenders tell you to close your old and inactive accounts in order to improve your credit scores. But closing old accounts and canceling credit cards may actually have an opposite effect with the current credit score rating system. It may leave a negative impact as it will make your credit history appear shorter and thereby lower your credit score.

Credit counseling causes harm to your score

Attending a debt management program will not cause any harm to credit score. The current FICO credit score rating system take no notice of any reference to credit counseling that may be mentioned in your file. The researchers have found that people who have opted for credit counseling have not defaulted on their debts and therefore it is not taken into consideration while tabulating credit score. However late payments can hurt your credit report and credit counseling can hurt your ability to avail a loan because you probably have had trouble paying creditors.

All credit reports are the same

Most people believe that credit reports from all the three credit rating agencies is same but it is not so. These days, most creditors across the country do report their information to all three major agencies – Equifax, Experian, TransUnion – and as they are separate firms, the method and the pace in which they update records may not necessarily be the same. So make sure you get your credit reports from all three major credit reporting bureaus before you apply for a big loan.