Credit repair can be frustrating and complex. To determine your credit score, the credit bureaus take into account many different factors which they weigh in different amounts. While there are many things you can do that will help improve your score over time, there are many myths about credit repair that just won’t go away.
Let’s go over 5 of the most common credit repair myths, so you can separate myth from reality when it comes to improving your credit score!
Myth 1: Closing multiple accounts will increase my score
Some people think that if they close all their credit card accounts after they’ve paid them off, not only will it help keep them from racking up more debt but it will also improve their score. The truth is that while paying down your debt will help raise your score, closing a bunch of accounts will reduce your overall “credit limit,” or the amount of credit available to you. This can actually hurt your score, since the credit bureaus want to see that you have available credit, but that you’re not using too much of it.
Instead, keep one or several credit card accounts open, but don’t use more than 10% of the available credit (or better yet, pay them down to zero every month).
Myth 2: Opening multiple accounts will magically increase my score
If having a lot of available credit improves your score, then opening a bunch of new credit cards should give you a good boost, right?
Wrong. The credit bureaus also take into account “credit inquiries,” and every time you open up a new line of credit it is recorded as a “hard inquiry.” Too many of these in a short period of time, and the credit bureaus will start to see you as a “risky borrower,” and lower your score.
Myth 3: Paying off debt will automatically give me a great score
OK, paying off your dept is a great way to increase your score, but it doesn’t mean that negative items will just go away immediately. Your credit report is really a summary of your credit history over the past decade or so. If you have missed payments or more serious issues like bankruptcies, those will stick around and negatively impact your score for years.
Paying off debt is a great strategy to raising your credit score, but you’re most likely in it for the long game and you shouldn’t expect any dramatic changes to happen over night.
Myth 4: I must get rid of ALL negative items on my report for it to improve
Your credit will start to benefit with every negative item you remove. You don’t have to wait until the report is flawless.
In fact, you may have to wait up to 7 years (and as long as 10 years in some cases) for legitimate negative items to go away. As time passes, their weight may diminish, and it’s possible for your score to start to go up even as the negative items remain (as long as you’re staying current on your payments on not adding new debt).
Myth 5: A credit repair company can fix any negative item
While credit repair companies are often very skilled at removing mistakes and errors from your report, they can’t remove legitimate negative items. If you missed several months of payments on a credit card, and there’s no disputing that fact, then all you can do is wait for enough time to pass before it goes away (up to 7 years).
For more credit repair advice, check out our tips and tricks page.
photo credit: anieto2k via photopin cc
photo credit: eva.pébar via photopin cc
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