With one piece of bad economic news coming out after another, lenders are scrutinizing everyone’s credit history like never before. Yet, many Americans don’t realize the impact of late payments on their credit score and their finances. In fact, mortgage loan delinquency reached a national average high of 3.23 percent for the first three months of 2008, according to TransUnion.
Here are some common credit myths that may be preventing you from shopping for credit to purchase your next home.
Myth: My credit score drops every time someone checks my credit.
Fact: Checking your own credit through the three services is considered a “soft inquiry” and does not impact your credit score.
Myth: Reviewing any one of my three credit scores occasionally will tell me everything I need to know about my credit standing.
Fact: Occasional monitoring will give an incomplete snapshot of your credit standing. You should, instead, check all three of your credit reports and scores frequently throughout the year because the information on each report can frequently vary.
Myth: There is only one score that lenders use to determine my credit worthiness.
Fact: There are hundreds of different credit models used by lenders in the market place today.
Myth: Closing old credit card accounts will clean up your credit reports.
Fact: Some people advocate closing old and inactive accounts as a way to manage their credit. In most cases, closing your older accounts will make your credit history appear shorter, which can negatively impact your overall credit standing.
Myth: If I don’t pay a medical bill on time because I believe it is incorrect, I can’t be held accountable.
Fact: If you fail to pay a medical bill in a timely manner, the delinquent payment may be reported late to a credit bureau. If you believe a medical bill you have received is wrong or was sent to you in error, it’s best to contact the provider to resolve or discuss the matter prior to the bill becoming past due.
Myth: The “credit bureaus” report people as having either “good” or “bad” credit.
Fact: Credit reporting companies compile information that is provided directly and voluntarily by consumer lenders. If you have a credit card, home or auto loan, or make other monthly payments, details of your payment track record on these are likely being reported by those parties.