5. Paying off delinquencies will restore your credit score
Nope. It will help, but don't expect a supersized boost, says Ulzheimer. That's because the delinquency will stay on your report, even if it has a zero balance.
Most derogatory information such as late payments, collection accounts, charged-off accounts, tax liens and judgments live on your credit report for seven years before dropping off. A Chapter 13 bankruptcy can linger on your report from seven to 10 years, while Chapter 7 bankruptcies remain on your credit report for 10 years.
"Don't expect your score to recover to what it was before the incident, because it ain't going to happen," Ulzheimer says. "The more important part is the incident."
6. Paying off loans early is better than making payments
"It's a Catch-22," says Sarah Davies, the senior vice president of analytics, product management and research for VantageScore Solutions, because while it may be good for your personal finances to pay off a loan, it doesn't do much for your credit score.
Indeed, a closed, paid-off account adds to your score, but an open credit account in good standing boosts it more.
That's because an open account shows you're consistently handling credit wisely. A closed account only shows good payment behavior in the past and becomes less and less predictive of future habits.
7. Paying before the due date helps your credit score
Your credit score takes into account how much available credit you're using. Paying a credit card balance in full 10 days or one day ahead of the due date won't help your utilization ratio and thereby improve your score. That strategy doesn't work because the balance of the account has already been reported to the credit agency, says Ulzheimer.
However, if you pay the balance in full before the statement closing date, which appears on your statement, your report will post a zero balance for that account. That will help your utilization rate, or how much credit you are using, along with your credit score, says Ulzheimer.
To get started, you will have to pay one credit card bill earlier than usual and then consider your statement date as your due date, says Ulzheimer. Also, you will need to check your balance online or over the phone to make sure you pay the correct amount.
8. All delinquencies are created equal
If you're in the unenviable position of having to miss a payment, choose carefully. Missing a mortgage or auto loan payment will ding your credit more than skipping a credit card payment will. "Those are more substantive debts, so they carry more weight in the credit score," Davies says.
Of course, missing a payment is a last resort. Pay the minimum payment to keep accounts current. To head off a catastrophe, contact a nonprofit credit-counseling service that can help you work with your lenders to come up with a more affordable, temporary payment plan or another solution.
9. I can't have any negatives on my report
"I'm here to tell you that you can have anything from a 30-day missed payment to a bankruptcy on your report and still have a really good score," says Barry Paperno, the consumer operations manager at MyFICO.com.
The most recent information on credit reports is weighted more heavily than older data, Paperno says. So if you have a bankruptcy from five years ago but have had good credit performance since, it's possible to have a 700 FICO score.
To build better credit, Paperno preaches consistent good payment behavior instead of a quick fix. The advice is simple: Pay the minimum payment every month at least, if not the full balance. Diversify your account types, and keep balances low. The result will be a higher credit score.
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Consumer credit reporting is the bastard step sister of consumer banking. Each has designed the perfect mousetrap in which to keep the consumer trapped, on a debt treadmill. The consumer is damned if s/he does, and damned again if s/he doesn't have debt and a payment history against that.
It is time to flush all 3 major Credit Reporting Agencies and their even more nefarious subsidiaries down the drain. Their subsidiiaries sell everything from consumer collection services to highly invasive consumer profiling. Your expectation of privacy in the USA is unfounded now.
The CRAs have very very deep pockets and strong lobbies. It is time to flush these morons and let their sleazy, nasty, rude employees get real jobs.
A bad credit rating is the best of all possible worlds: if you have good credit, someone WILL loan you money; if you have no credit, someone MIGHT loan you money; if you have bad credit, no one will loan you money...and you don't have to give it back. :-)
A credit rating is only required to allow access to money. But thats not true. If you have a good credit rating you will pay less for, Car Insurance, Rental Property, Perscriptions from a CO OP, Fuel from a CO OP. It will be easier to find work, and you will find healthcare is easier to access if you have good credit.
Your credit report is used by many companies, as they determine the type of person that you are by your credit rating.
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