Credit Secrets & Tips Blog

Heard the term “phishing” but unsure what it means or how to tell if someone is doing it?

Or maybe you’re up to speed on it, but you have family members and friends who might not recognize a phishing site?

Either way, take a look at Carnegie Mellon’s Anti-Phishing Phil, a game that teaches people to identify (and avoid being tricked by) phishing websites.

Play the game and have a fun.

In the past nine months change since I started this blog, I’ve written a lot about credit repair, debt management, money savings and other related topics.

While I’ll always have plenty to say, I want to make sure this blog is both helpful and interesting for you.

So, what would help you the most on this blog?  Is there a topic I’ve covered that you want to learn more about? Do you have an idea for something I haven’t discussed yet?

Send your suggestions to support@insiderguidetocreditrepair.com!

There are a wide variety of myths floating around about what you should and shouldn’t do to improve your credit reports and credit scores. This post provides you the truth about credit:  
 
1.  Your score will drop if you check your credit

Fortunately, this one is definitely not true. Checking your own report and score is counted as a “soft inquiry” and doesn’t harm your credit at all. Only “hard inquiries” from a lender
or creditor, made when you apply for credit, can bring your credit score down a few points.

Worried about damaging your credit while shopping around for a loan? Multiple inquiries for the same purpose within a short amount of time (a few weeks) are grouped together into a less damaging period of inquiry.

2.  Closing old accounts will improve your credit score

To close or not to close, that is the question. Many people advocate closing old and inactive accounts as a way for improving your credit.

In most cases, closing accounts will actually have the opposite effect. Canceling old credit accounts can lower your credit score by making your credit history appear shorter. Think twice before closing the oldest account on your credit report.

If you want to reduce your levels of available credit, ask for your credit limits to be lowered or close newer accounts instead.

3.  Once you pay off a negative record, it is removed from your credit report.

Negative records such as collection accounts, bankruptcies and late payments will remain on your credit report for 7-10 years.

Paying off the account before the end of the set term doesn’t remove it from your credit report, but will cause the account to be marked as paid.  It is still a good idea to pay your debts, it can improve your credit score, but the major improvement will come when the record expires.

4.  Being a co-signer doesn’t make you responsible for the account

When you open a joint account or co-sign on a loan, you are taking on legal responsibility for the account. Any activity on these shared accounts, good or bad, will show up on both people’s credit reports.

If you co-sign for a friend’s auto loan and they don’t make the payments, your credit profile will be hurt by their actions and visa versa. The only way to stop this double reporting is to refinance the loan or to have the creditor officially remove you from the account.

5.  Paying off a debt will add 50 points to your credit score.

Your credit score is calculated using a complex algorithm that takes into account hundreds of factors and values. It is very hard to predict how many points you can gain by changing one factor.

For a person with a high credit score, just one late payment can cause a significant drop. If a person has a low credit score, it may not cause a large drop at all.

There is no magic way to improve your credit score, just keep paying your bills on time, reducing your debts and removing negative inaccuracies from your credit report.  Good financial behavior and time are the two most important factors for your credit score.

As a rule, credit score analyze the credit related information on your credit report.  How they do this varies.  Since FICO scores are frequently used, here’s how these scores assess what is on your credit report:

1.  Your payment history - about 35% of a FICO score

Have you paid your credit account on time?  Late payments, bankruptcies and other negative items can hurt your credit score.  But a solid record of on-time payments help your score.

2.  How much you owe - about 30% of a FICO score

FICO scores look at the amount you owe on all your accounts, the number of accounts with balance, and how much of your available credit you are using.  The more you owe compared to your credit limit, the lower your score will be.

3.  Lengthy of credit history - about 15% of a FICO score

A longer credit history will increase your credit score.  However, you can get higher score with a short credit history if the rest of credit report shows responsibility credit management.

4.  New credit - about 10% of a FICO score

If you recently applied for or opened new credit accounts, your credit score will weight this fact against the rest of your credit history. FICO score distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur. 

If you need a loan, do your rate shopping within a focused period time, such as 30 days, to avoid lowering your credit score.

5.  Other factors - about 10% of a FICO score

Several other minor factors also can influence your score.  For example,  having a mix of credit type on your credit report - credit cards, installment loans such as a mortgage or an auto loan, and personal lines of credit - is normally for people for with longer credit histories and can add slightly to the credit score.