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What are the Alarming Misconceptions We Have with Our Credit Reports?

By Derek Brown
Published: Wednesday, June 30th, 2010

Having not to understand the dangers of ignoring how your credit report is generated and how it works puts your credit history (read: future) at stake. There are various misconceptions floating around and it might hit your record soon. So before this would even happen, be familiar with some misconceptions a lot of people have with credit reports.

One might have probably heard that if a creditor checks your credit report, it affects your credit score negatively, this one is absolutely true. This is called “hard inquiry” and it will stay and affect your credit standing for about 2 years. Because this one gives an impression that you are looking for a lot of credit which is not a positive thing. A good practice, though if you want to shop around is to make multiple inquiries at a span of less than a week. For example, if you are looking for a lender who can give you the best rate with your home mortgage, you can make multiple inquiries in less than a week so that these inquiries will just hit you once under the same point of one inquiry.

However, rumors flying say, if you checks your own credit report your score will drop just the same. Fortunately, this is the opposite of being correct. Checking one’s credit report is considered a “soft inquiry” and doesn’t harm your credit. As a matter of fact, checking your record is a good practice for you to better manage your credit. This is a good way to know if somebody is using your identity. A thumb up rule is checking it every month which means aside from your free credit disclosure that you are entitled of; you can subscribe to monitoring services which gives you access to your credit report anytime especially if you have experienced having your identity stolen.

Closing old accounts is never recommended. Most people think that closing their old accounts is a way of managing their credit, well think twice. Cancelling or closing your old and inactive accounts can decrease your credit score because it will appear that you have shorter credit history, which is actually a good thing. So, with regards to your 19something year of account opening date, let them be because they will put you of great advantage.

Last among our list, if you want to increase your credit score by paying off your negative records such as past due accounts because you are applying for a car loan tomorrow, think again. Negative records like collection accounts, past due accounts, charge off and bankruptcies stays on your credit report for 7-10 years. However, it will be marked as paid which will create a good impression to your creditor. Remember that they don’t just base their decision to your credit score alone; they take time and look at the report itself. So paying off your debt is still a good practice.

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