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credit myths Archives | Ovation Credit Repair Services

Credit Myths Debunked

By | Credit Laws, Credit Repair

If you don’t work in the financial industry, it’s likely you are confused about at least one or two items that affect your credit. There are so many myths floating around about credit scores, credit reports, and the factors that contribute to a high score, that even the most educated consumers are still confused on certain items. We’re here to help debunk some of the popular myths and help set the record straight.

  • Closing your oldest account immediately improves your credit. Since the length of your accounts determines fifteen percent of your credit score, many people believe that closing their oldest account will immediately affect their credit. However, the truth is, that account will remain on your report for several years and will still be taken into consideration when determining your score. Closing your oldest account will lower your average length of credit history; therefore, it will actually end up lowering your credit score.
  • Medical debt has a different effect on your score. Many people believe that medical debt that has gone to collections does not affect your credit score. However, all debt reported to collections, including medical debt, is generally reported. In general, debt that is in collections will have a negative impact on your FICO score.
  • Carrying debt is necessary to build credit. Many consumers believe that they must carry a certain amount of debt in order to continue to build their credit. But, it isn’t necessary to overload yourself. What is important is demonstrating responsible use of credit rather than not using credit at all. In addition, it’s important to ensure that you limit your credit use to keep your credit utilization ratio down.
  • Short sales are better than foreclosures. Despite popular belief, short sales and foreclosures have the same impact on your FICO score. The reason is that both are considered to be defaults on your obligations.
  • Lenders are required by law to report your account activity. There are actually no laws that require lenders to report your activity to credit reporting agencies. The only law surrounding this subject is that what lenders report must be accurate.

The most important thing consumers need to understand and realize is that if it’s in your credit report, it will be used to calculate your score. Your credit score is calculated by software systems. The software must be written in a way to identify and consider new items. Calculating your credit score is actually a science and not subject to human interpretation or error. Knowing and understanding your credit score is intimidating, but crucial for your financial success.

If after learning your credit score, you determine that you are not in a good position for financial success, you may be a good candidate for credit repair solutions. At Ovation, we are here to help. Our credit repair plans are customized to meet your unique needs.

Contact us today to see how we can help.

 

Credit Repair Myths: Can Closing Accounts Improve My Credit?

By | Credit Repair, Credit Scores

When it comes to credit repair, there is often more fictional information than there is fact. In this article we will continue to explore some of the credit repair myths and most common misconceptions consumers have when it comes to credit. Today, we’re talking about whether or not closing accounts is good for your credit (in the short and long term).

When it comes to closing credit card accounts, it might seem like having your credit report reflect closed accounts would immediately improve your score, but the truth is, closing accounts can actually drop your score.

Myth: Paying off and closing credit accounts will improve my credit score immediately.

Fact: Paying off your credit cards will help, but closing the account will hurt.

Your overall credit score is determined by a number of different factors, but one of the key factors used in determining your score is how much unused credit you have available. If you close your credit card, it reduces the amount of unused credit available and can potentially have a negative impact on your credit score.  As a rule of thumb, you should never use more than 40-50% of the available credit on any card. By closing the account on a paid-off card you’ve gotten rid of a portion of the credit available.

A Better Plan to Repair Credit

A better way to repair credit is to make consistent payments every month that are higher than the minimums due on all of your cards. Credit history represents 35% of your credit score, so you can improve your credit by establishing a consistent history of regular, on-time payments. You can still have a goal of paying off cards, but leave them open, use them occasionally, and pay them off. Treat credit cards like a tool to improve your credit score, allowing you access to better interest rates on large purchases, instead of using them like extra cash to spend.

If you need help creating a credit card payoff plan, Ovation has tools that can help you determine whether to target the card with the highest balance, the card with the highest interest rate, or many other scenarios. And, we’re always here to provide you a free consultation to help you with your credit repair issues! Just give us a call: 1-866-639-3426.

More Credit Myths Debunked

By | Credit Cards, Credit Laws, Credit Repair

Here at Ovation, we feel that knowledgeable consumers are empowered consumers, which is why we spend so much of our time and effort providing education about credit laws, credit cards, and credit repair. We want you to be informed, perceptive credit users who use credit as a tool instead of being a slave to credit.

Part of being a savvy credit consumer is being able to move beyond the myths that surround credit. Your credit score is more than just a number; it is your ticket to better interest rates, strong purchasing power, and sometimes a better job. Today, we’re busting a few credit myths and bringing you the truth.

I can boost my score by cancelling credit cards.

While it might seem logical that closing accounts would boost your credit, the opposite is actually true – especially if you close accounts you have had for a long time. Credit history carries a lot of weight – 35% of your credit score – so closing older accounts can actually be very bad for your overall credit score.

I can’t apply for credit because too many inquiries are bad for my score.

While it can be detrimental if you’re always applying for new credit cards and opening new accounts every month, credit-reporting agencies recognize when a consumer is simply shopping. If multiple mortgage or auto credit inquiries come in during the same 30-day period, the credit agencies will assume you’re on the hunt for the best deal and it won’t count against you.

I pay my bills on time every month, so I don’t need to check my credit reports.

Every single person absolutely must take responsibility for actively managing their credit and reviewing the information on their credit reports. Even if you are paying all of your bills on time every month, you should be making certain that no one else is using your good credit and that your efforts are being properly reported. You can request a free copy of your credit report from each of the three reporting agencies once per year.

As long as credit myths keep popping up, you can count on us here at Ovation to keep peeling away the layers of confusion so that you can be an empowered, informed consumer in charge of your own financial destiny. If you have questions or concerns about your credit, feel free to contact us today for a free consultation.

 

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