<!DOCTYPE HTML PUBLIC '-//W3C//DTD HTML 4.01 Transitional//EN' 'http://www.w3.org/TR/html4/loose.dtd'>; <html><head><title>Article Directory Online : Free Online Article Submission - Articleonlinedirectory | Busting Six Credit Report Myths</title></head><body><h3>Busting Six Credit Report Myths</h3><br /><br />By: <br /><br /><p>A credit report is not only a person's borrowing history, it provides a score rating used by a lender to help determine whether an individual qualifies for a loan, credit card or service. In short, credit scores exist to aide a company or bank in estimating the amount of risk it incurs by lending money to a potential borrower. The higher the score, the less risk a person represents. Credit reports represent a person's financial health and therefore can be an important asset to securing future loans. <br /> <br /> However, there are many misconceptions in existence regarding credit reports and scores. Understanding the truth behind these myths is essential to exercising or improving one's credit.<br /> <br /> 1. Credit scores are arbitrarily decided by the credit reporting agencies. <br /> <br /> Loans or credit cards are closely monitored by the lending institution in regards to how much interest is accrued and how the loan is repaid. In turn, the bank or other lending company reports how an individual handles that debt to the credit reporting agencies (Equifax, Experian and TransUnion) to calculate a credit score. These agencies use a system created by the Fair Isaacs Corporation (FICO), a fairly complicated calculation that determines an individual's score. Everyone's score is derived from this system.<br /> <br /> 2. Paying on debts will instantly improve my credit report. <br /> <br /> A credit report is more than just a snapshot of a consumer's present financial situation. It also shows a history of how past debt was handled. While it's important to pay debts on time, it cannot instantly erase any mishandling of debt from the past. <br /> <br /> 3. You can boost your score by canceling credit cards. <br /> <br /> Many people have heard that because open credit accounts indicate potential available debt, they should be closed. In reality, experts recommend keeping at least two to three accounts of active credit to demonstrate to creditors that you can manage the debt responsibly. What may surprise some is that paying bills on time and not being overextended weighs more heavily to creditors than having $3,000 available on an unused card. Keep in mind that opening a charge account once in a while to take advantage of a special offer is okay, but agreeing to several at one time could cause a decrease in one's score. <br /> <br /> 4. Paying bills on time means not having to check one's credit report.<br /> <br /> A recent study by the Consumer Federation of America and the National Credit Reporting Association found a range of misreporting in credit reports. As many as 78 percent of the files reviewed were missing a revolving account in good standing, while 29 percent had conflicting information in regards to how often a consumer had been late in payments during a 60-day period. Many reports list erroneous birth dates or even accounts for which a consumer never applied.<br /> <br /> Also keep in mind that while creditors report information to all three agencies, this was not so in the past. It's a given that discrepancies probably still exist between the reports. Additionally, each separate company updates their records at varying speeds. It's imperative that individuals check their reports annually and take the steps to make any corrections needed. <br /> <br /> 5. Numerous inquiries on a credit report can hurt the score. <br /> <br /> While this statement was true at one time, according to spokesperson at FICO, credit agencies recognize that often consumers are shopping for the best rate on a home mortgage or car loan and so are not penalized, especially for instance if a group of inquiries are made within a 30-day period. Credit agencies recognize that the way consumers shop in the new millennium has changed from traditional mindsets. But as with all things, moderation is key. Numerous inquiries to an account from department and other stores can affect one's score. <br /> <br /> 6. It costs something to read a credit report.<br /> <br /> Thanks to the Fair Credit Reporting Act (FCRA), it's mandatory that each credit reporting agency provide a free copy of a credit report each year at a consumer's request. It is advised consumers take advantage of this free offer so as to check their credit report for any inaccuracies or evidence of identity theft.</p> <br /><br /><b>Author Resource:-></b> <a href=http://www.AmericanMomentumBank.com>AmericanMomentumBank.com</a> provides a wide array of personal banking and business banking options and banking solutions tailored to your individual needs. For more information, please visit <a href=http://www.AmericanMomentumBank.com>AmericanMomentumBank.com</a>.<br /><br /><b>Article From</b> <a href='http://www.articleonlinedirectory.com/'>Article Directory Online : Free Online Article Submission - Articleonlinedirectory</a><br /></body></html>
