Credit Score Myths Debunked

Ray at Financial Highway goes Mythbusters on credit scores, revealing 7 myths about the financial benchmarks.

Here’s a sampling of his wares:

Paying My Debt Will Fix My Score

Unfortunately there is not a quick fix for your credit score; if you had payment issues in the past it will take some time before things improve. Your credit score is a history of your payments over a long period of time, although paying a debt will help improve your score it will not magically fix everything.

Scores Get Merged When Married

I have heard this one a few times recently and am not sure how it has started. Your credit report is yours and yours only; it will not be merged or otherwise mixed with your spouse’s. If you apply for joint credit the information will reflect on both reports, however your credit reports will never merge.

Another important myth Ray deflates is the belief that if you pay all your bills on time, you don’t need to check your credit report. Mistakes make their way onto the records of financial saints and sinners alike.

7 Credit Score Myths [Financial Highway]

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  1. pecan 3.14159265 says:

    AHH! This chick again! She’s back, like zombie companies!

  2. bhr says:

    8. Just because a creditor agrees to remove a negative mark from your credit doesnt mean it will happen.

    9. A single account in collections can show up under your credit 3 or more times.

    10. Just because you stopped paying the bill and defaulted 5 years ago doesn’t mean that the creditor isnt still reporting you.

    11. A settled debt may still be showing as open, or as “settled for partial payment” rather then closed.

    12. A “Charge Off” still counts as a open line when applying for loans.

  3. tinyhands says:

    Don’t forget the biggest myth, that you even need to know what your credit score is in the first place. It’s a number. Either you have bad stuff on your credit report that you need to fix, or you don’t. See my comment history (aka rants) for more details.

  4. LESSTHANKIND says:

    My favorite myth: That your credit scores don’t matter unless you’re applying for a mortgage or car loan. NOT TRUE. When your scores go down, your creditors see this and take action (known as “adverse action”) like lowering your limit, raising your interest rates or closing your account entirely. If you’re carrying balances, this stuff matters to your everyday life.

    Credit scores are not just for when you’re applying for something. Every time you open electric, cable, phone or cellphone accounts, or rent an apartment (etc. etc.), they pull your credit. And scores are used by everyone you *already* have accounts with, to monitor risk. Remember all your creditors monitor your reports/scores regularly. When your scores go down, they feel their risk goes up. And they will act accordingly, especially these days. A major fall in your scores will cause everyone you do financial business with to think you’re in trouble, and they will do what it takes to limit what they perceive as the increased risk you now represent.

    Our credit scores are going down when we’ve done nothing wrong, as a result of accounts being closed, limits being lowered and rates going up. And when credit scores go down, more of those kinds of actions occur, and scores go down further. Then no one qualifies for mortgages or loans anymore, even though their ability to pay is the same as it was before. So basically, you’ve got people who might want to buy a home or a car and contribute to the economy by keeping banks in business, yet their tanking scores–which often tanked for no good reason–aren’t good enough now.

    Second favorite myth: That you have “a credit score.” No. You have several.

    • LESSTHANKIND says:

      And I should add to myth #1 the mistaken notion that only negative items (“bad stuff”) on your credit reports can lower your scores. You can have a squeaky clean report and watch your scores go down because lowered limits/closed accounts raised your utilization percentage, or a bunch of 10-year positive accounts dropped off, drastically lowering the length of your history.

      There’s a lot more to all this than meets the eye. Too many people have overly simplistic views based on a lack of knowledge, and they mislead others into believing “your scores don’t matter unless you’re planning a major purchase/pay your bills and your scores will take care of themselves.” Bad advice.

  5. rondalescott says:

    I have decided to opt out of knowing, or indeed even caring about, my credit score. I will just go on living responsibly, paying my bills on time and reducing–and they staying out of–debt. I have this theory that everything will be fine if I do this.

    • SteveZim1017 says:

      Hey! no thinking outside the box. Get back in line with the rest of us!

    • tinyhands says:

      Welcome to the dark side.

    • jeffbone says:

      Your philosophy, as admirable as it is, is built on the arguable assumption that no financial institution will even make a mistake in reporting information about you to the various credit bureaus. I agree that it’s counterproductive to fixate on a particular score; however, in the interest of self-preservation I still check my score at Credit Karma about once a month just to make sure nothing unexpected has happened.

      Put more succinctly, as a famous man once said: “Trust, but verify…”

      • rondalescott says:

        I suppose I could worry about that.

        Or, I could accept that perhaps I may end up in a situation where people I have never heard of (let alone met) are telling other people bad things about me.

        I think I’m actually okay with that. Let those shadowy data-mining bastards think anything they want about me. I’ll be over here living in ignorance of my poor credit score. /waves

        • johnnya2 says:

          Ignorance is the word you use, and I would not argue that point. Everything else you posted is not just ignorance, but stupidity. If you pay your bills on time and end up with bad things on your reports df you realize it could cost you money? Cause you not to get the best deal on car insurance, the apartment you want, the JOB you want. A landlord may not allow you to rent a spot for your business. I guess you would be one of those people who gets their bills and does not question if their might be a mistake on it, because you will blindly do whatever somebody tells you. Get a clue and life you ignorant fool

          • LESSTHANKIND says:

            There’s no arguing with someone who has a “theory” based on nothing but what they feel should be true, and assumes that theory is not only correct, but applies to everyone.

            This very website wouldn’t even exist if not for all the things that should, in *theory,* not happen… but do.

          • rondalescott says:

            Wow, not just a clue, but also a life? I the anger in your reaction to my position to be interesting. Where does that come from? Perhaps you’re full of anxiety and irritation because you have to keep track of what four different major credit bureaus and several banks have managed to data-mine about you.

            As for your examples, I reject them all out of hand. I have a perfect driving record and have for over a decade. I’m not worried about my insurance costs. I own my own house and will have it paid off in less than four years. I don’t care about apartments. As far as jobs? If an employer uses my credit score to reject me out of hand for a position in exclusion of my job history, excellent references, and the feel they get from interviewing with me, they do not deserve the privilege of my working for them. Their loss.

            I’m sorry, but I just don’t find any of those arguments to be convincing. Even if I had some problem based on my credit score, I believe that a phone call, a little social engineering, and a good attitude will go a long ways towards clearing up any problems.

            It may not be completely accurate, given the juxtaposition of our opinions on this, to refer to ME as the one who “blindly does whatever somebody tells me.”

  6. wvFrugan says:

    MYTH #8 “That I give two shits and a fuck what this current system that enables predatory capitalism does”. I refuse to play along…it CAN be done, but is not simple or easy…BUT it is very rewarding IMO!

  7. Winter White says:

    Timely…my 56-year-old mother called me the other day utterly indignant that her FICO had dropped 50 points because she had no revolving debt. I pointed out that you need a mix of long term debt (her mortgage) and short term (credit card) in order to have a perfect score.

    I had to put her on speakerphone while I went and did other things, she ranted for about 20 minutes. I told her I’d be happy to let her pay for my vacation if it would help her out…she didn’t find that funny. Oh well.

    • SacraBos says:

      That’s why it’s a “I Love Debt” score for their benefit not yours. Just like your mother, you can live responsibly and your score will can go down, when if should actually go up. And how do you get it to go up? Have more potential for debt. It’s stupid.

  8. FDCPAGuy says:

    I’d like to add a few of my own.
    Myth 8: Paying a collection will help my score. FALSE. The fact that the collection remains on your report, either paid or unpaid, is what hurts your score. I usually say only pay collections if they will agree to delete completely from the credit report (and get it in writing). Of course collectors don’t like me much but I’m not here to make friends ;)

    Myth 9: Paying a judgment/public record item will help my score. FALSE. All paying them does is mark it as satisfied on the report and make sure it falls off after 7 yrs (unpaid judgments never come off). Same rational as #8 above. I’d advise paying these, to avoid garnishments etc, but also dispute them off the report once paid.

    Myth 10: Just because I co-signed it doesn’t mean I’m responsible for it. FALSE. Don’t co-sign for anything unless your plan on making sure the payment gets made on time. I’ve seen too many people co-sign for little Jonny’s car and Jonny doesn’t pay the bill in a timely fashion. Then they get indignant about it when questioned about it.