Credit rules our lives, and credit scores determine how much credit will be extended to us. For this reason, keeping an eye on your credit score and credit report is essential if you want to take control of your finances. Unfortunately, many people may be unaware of how a credit report works and may fall for conventional perception sprinkled by misconceptions and misbeliefs about it.
If you are one of the many people who aren’t completely sure about credit reports and scores and how they work, you are likely to succumb to some of the many myths that could prevent you from using your credit appropriately. To help you steer clear of these misconceptions, Marcel Ghazouli – Mortgage Broker, AMP has debunked two of the most widely believed myths about the credit bureau.
Myth 1: My credit score will go down if you pull my credit report!
This is one of the myths I hear most often, and it’s simply not true! In fact, checking your score on a regular basis can uncover errors in your credit bureau that might otherwise go unnoticed. When your credit bureau is checked, it can be done as a soft inquiry or a hard inquiry.
A soft inquiry is when you are not applying for a loan or credit, for example, when you check your own score, or when an employer runs a credit check with your permission.
A hard inquiry is when you are applying for credit, whether this is for a credit card, a mortgage, a line of credit, or other types of loans. This inquiry will show up on your report, whereas a soft inquiry does not.
Things that will actually affect your score negatively include a high outstanding balance relative to your available limit, late payments, collections, or applying for a lot of credit facilities in a short period of time, amongst others.
The origin of this myth is understandable because multiple hard inquiries in a short period of time could be taken as a sign that you are ‘credit shopping.’ To clear the air, when you are seeking credit for mortgage purposes, a broker will make one credit inquiry and use that for more than one submission (if necessary), so this does not count as multiple hard inquiries.
Myth 2: One large payment can compensate for regular payments
The best way to keep your credit score as high as possible is to pay your regular liabilities every month! Even if you can only pay the minimum amount, that is much better than missing a payment completely. Some people assume that if they pay a large amount one month, they can skip the next month, but that is not true. Any late or missed payment can impact your score.
Another thing you should do to keep your score high is to keep your balance owing to less than 50% of your available limit, wherever possible.
If you see an error on your report, you should contact the credit provider to fix it, and you may also want to call Equifax and TransUnion to notify them of the error so that they can make a note of it in your file.
It’s important to note that if you lose a card or if your wallet is stolen, immediately notify the credit card companies and Equifax and TransUnion so they can make a note of this on your file and advise credit grantors not to extend credit before contacting you to make sure it is you who is seeking the credit and not someone who is trying to do so via identity theft.
If you’re looking to steer clear of these myths, reach out to Marcel Ghazouli – Mortgage Broker, AMP. As a leading mortgage expert in the Greater Toronto area, I will help you make the right financial decision through unbiased advice and financial strategies. With over sixteen years of experience working in the mortgage industry, I have access to several mortgage products and lenders. My services include private mortgages, reverse mortgages, refinance mortgages, home purchase mortgages, condo purchase mortgages, spousal buyout mortgages, cottage property mortgages, rental property mortgages, vacation property mortgages, commercial property mortgages, and investment property mortgages.