Misconceptions or myths regarding credit reports are quite common in the market and most consumers tend to get affected by them. Thus, they do certain things which can negatively affect their credit report. Let's take a look at 5 credit report myths that one should be aware of:
1. There's no need to check my credit report, if I pay bills on time: This is major mistake which most of the consumers make. Though you pay your bills on time, yet you should make it a point to check your credit report on a time to time basis. You may find conflicting information listed on your credit report. You will have to negotiate with your creditors/credit bureaus and get it corrected or else your score will take a hit.
2. FICO scores are locked in for six months: Many believe that credit scores are locked for 6 months. However, the fact remains that FICO scores are dynamic and change as soon as your lender/creditor reports anything to the credit bureaus regarding your loan/credit accounts.
3. Paying my debts will improve my credit report immediately: Though it is good to pay off as much debt as possible, yet it won't improve your credit report instantly. Your credit report will take into account, the past debt payments as well. If you've defaulted on your payments, it will remain on your credit report for 7 years.
4. Closing credit cards will help me improve my score: Most people tend to believe that open accounts actually mean potential debt. Thus, lenders may take it in a negative sense. So, it's better to close them. But, most lenders will want to see at least 2-3 active credit accounts. Lenders will actually look into the fact whether or not you're able to manage your credit cards well by paying the dues on time.
5. My credit score will drop if I check my credit report: Credit inquiries are of two types – soft inquires and hard inquires. Inquires by the consumers to check credit score or own credit report (also known as soft inquires) won't affect credit scores in a negative way. It won't have an impact on the credit report. However, if a lender or a creditor checks your credit report for giving you a mortgage, auto loan, credit card, etc., it's known as a hard inquiry and may reduce your credit score by few points. However, multiple inquires for a same purpose within a given span of time would be grouped as one and won't have much affect on your credit score/report.