It is standard operating procedure for the lender to verify your credit score whenever you apply for any type of credit, be it for a mortgage or a shopping purchase on a credit card. The credit score, which is a measure of your ability in the past to successfully manage your credit, will be in the range of 300 to 850. If you are an average debtor, your score should fall at 678, with 620 considered as a high-risk (sub prime) score.
Unfortunately, there are a number of myths floating around, of which your belief in can actually hurt your score in one way or another. Let’s discuss and debunk a few of those myths in greater detail.
Myth No. 1 – Each of the credit bureaus utilizes different formulas to arrive at a credit score.
Actually, the 3 recognized credit bureaus – Experian, Equifax and TransUnion – utilize the same formula ผลบอลสด for arriving at the scores of individuals. As such, your score is almost always in the same range – good, fair, and low – for all three bureaus because of this fact.
The slight variations in your score number are due to the differences of information about your credit history. For example, Experian’s information may be outdated than the other two or Equifax’s information may be lacking about a recent major purchase. Usually, lenders will settle for the middle scores when considering your credit application.
Myth No. 2 – Closing old accounts will improve credit score
This is far from the truth but many people have fallen for it and, subsequently, lessened their chances for credit approval. In fact, you may be significantly hurting your credit score! Keep in mind that the credit bureaus will compare your total available amount against your total credit amount.
Thus, when you close your old, unused accounts, you are actually lessening your untapped sources for paying the credit you are applying for. As a consequence, you are also lessening your chances of successfully availing of the credit.
If you still want to close accounts, the better option is to close the newest ones and transfer them into your oldest accounts. This is because the latter have already accumulated more history than the former.
Myth No. 3 – Shopping around for any type of loan will hurt the score
Each loan application requires a verification of your credit score by the prospective creditor and, hence, is counted as an inquiry. Too many inquiries will indeed lower your score but you can counteract it by applying for loans within 14 days of each other. This will not adversely affect your score although it must be emphasized that this grace period only applies to home equity loans, mortgage loans and car loans, never to credit card loans.