In our last report, I helped explain how a credit score is formulated and what factors are used to calculate your credit score. In this article, I will help explain what the credit score means to you and talk about some of the myths and truths concerning credit scores.
NEGATIVE INFORMATION STAYS ON MY CREDIT REPORT FOR ONLY 7 YEARS. True of False?
ANSWER: The answer is yes and no. Yes, for bad or negative info on your report, including late payments. Negative information should be removed after 7 years. No, for good information. Most positive information can stay on your credit reports forever, such as good payment history and length that a healthy account has been open.
I RELY ON THE CREDIT SCORE REPORT I GOT FOR FREE? True or False?
ANSWER: False: The credit score you receive for free will not be your FICO score. Howver, if you diligently check your reports once a year through AnnualCreditReport.com, you will at least see if there is any negative or incorrect entries on your Experian, Equifax and Transunion reports that need your attention. You can receive your FICO scores from MyFico.com for $15.95 per report from Transunion and Equifax. Experian, however, does not participate in this service.
I PAID LATE BUT I AM UP TO DATE NOW. MY CREDIT SCORE IS OK, RIGHT? True or False?
ANSWER: False. The damage is done if reported to the credit bureaus, despite the fact that you have caught up and are not behind in your payments. Most creditors will wait 30 days before reporting a late payment, but once reported, the negative report factors into the most important item in your credit score. Approximately 1/3 of your credit score is based upon timely payments.
I PAY MY CREDIT CARDS IN FULL EACH AND EVERY MONTH. MY CREDIT HAS GOT TO BE GOOD, RIGHT? True or False?
ANSWER: FALSE. The fact that you pay in full every month means that the creditors will not report negative activity to the credit bureaus. However, it is NOT reported that you pay in full each month. In fact, the credit bureaus have no idea what your payment history is, except as reported. Still, it is a good idea for your financial health to pay in full each month.
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