Credit Report Questions

Someone's credit rating is an integral part of his financial life. A lot of institutions and individuals regularly look at your credit score, from banks, credit unions, utility firms, landlords, insurance companies and perhaps your employer. According to a latest survey, 50% of Americans don’t really know how their credit scores are derived, or what factors are included in order to work out those three vital numbers. There are five familiar credit report questions.

Myth No. 1 – The Major Credit Companies Use Different Formulae In Computing Credit Scores

Perhaps on of the most the most common credit report questions. The reality is that the big credit institutions, from Transunion, experian and Equifax, all have a different term for the same thing. TransUnion for instance, labels it the Empirica, and Experian gives it the label Experian/Honest Isaac Risk Model. While the big credit bureaus have various names for the credit score, they still use the same formula for coming up with it. As the scores used by the major credit bureaus are essentially the identical, lenders often use just one credit report to analyze your loan application.

No.2 – To Rebuild Your Credit Rating, Just Re-Pay All Your Debts

The truth is that your credit score will be strongly influenced, and determined by your past credit payment history, and not by the amount of debt you have at the moment. While you might be currently rapidly paying-off your credit card debts, and settling all other outstanding commitments, your previous history of late or missed payments will have an effect on on your score. As the credit professionals frequently tell us, it needs time to rebuild your credit score.

Myth No. 3 – Closing Old Accounts Helps Boost Your Credit Score

Worst understood of all the credit report questions, this myth’s nothing, but a common delusion. The truth is that closing old accounts won’t affect your credit score, but opening more accounts will definitely hurt your score. Having too many accounts does damage to your credit score, as your score is generally affected by the difference between the credit you have available and the credit that’s being used. Shutting-off an old account just helps to make your credit report appear young and fresh, but the damage has already been done before.

No.4 – Looking Around For A Loan Hurts Your Credit Score

If someone makes an inquiry about your credit score, the score may drop by as much as 5 points. Some borrowers frequently fear that if they shop around for lenders, each time the lender makes an inquiry, their credit score plummets again. The truth is that multiple loan inquiries are by and large processed as a single inquiry, as long as they come within a 45-day period. It would help if you do your loan rate shopping during that forty five day period.

Myth No. 5 – A Lender Can, For A Small Fee, Fix The Credit Score

No organization can help to soften up or change your credit score, particularly when it’s complete with lots of information about you not managing your debts properly. The one way to enhance your credit rating, is by showing that you can manage your debt load well in the future.

To improve your credit rating, you need to do four things: Cut down your debt load, Pay your bills regularly, Remove existing errors from your credit report, and apply for credit once in a while. If you still have unanswered credit report questions, let us know and we'll try to answer them.

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Harry Johnson