Don’t fall for credit myths! We all know a neighbor, relative or friend who will share “great” credit knowledge that they heard. Keep in mind though just as other subjects credit also has its myths. Today we will be busting these myths and share tips on what you should and shouldn't do to your credit.
Paying off a negative item on your report will remove it from your record
Collections, public records, and late payments will remain on your credit reports for up to 7-10 years of the last activity. Paying off the negative account before the end of the agreed term doesn't remove it from your credit report, but it will update the account to “paid.”
Paying off a debt will increase your credit score
A very complex algorithm is used to calculate your score. It takes into account hundreds of factors. Because of this it is very hard to predict how many points you can gain by changing one of those factors. For example, a person with a high score who makes one new late payment would more likely have a significant score drop. On the other hand a person with a low score and a new late payment would be less likely to have a huge drop at all. The two most important factors are your good financial behavior and your timeliness. Be sure to pay your bills on time, continue to lower your debts, and work on removing inaccuracies on your report.
Co-signing an account doesn't make you responsible for the account
When co-signing or opening a joint account you are accepting legal responsibility for the account. All activity whether good or bad will show up on both individuals credit reports. If you co-sign for your friend’s auto loan and they default on payments, your credit will be hurt by their actions and vice versa. The only way to stop it from reporting is to refinance the loan, or to have the creditor remove it from your account.
Closing old accounts is a good idea
As previously discussed, many people will consider closing accounts to improve their credit. Many people will advocate closing old and idle accounts as a means to manage their credit. Once again think twice before closing any accounts! Closing an old credit account can lower your score by making the credit history appear shorter. Read our additional tips on closing accounts in our previous post.
MSI Credit Solutions provides superior credit restoration and comprehensive consulting services that are reliable and affordable. For any questions or to schedule a free credit consultation, contact us at (866) 217-9841.
*The information in this article has been provided strictly for educational purposes.