What Affects Credit Scores? 7 Misconceptions

What Affects Credit Scores? 7 Misconceptions

If you're trying to raise your credit score to get a good rate for a refinance or HELOC, you might be surprised by what affects--or doesn't affect--your score. You have to keep your credit score up in case you want to take out a second mortgage or home equity line of credit (http://www.houselogic.com/articles/home-equity-line-tips/) (HELOC), or get the lowest premiums on your home owners insurance (http://www.houselogic.com/articles/improve-your-insurance-score/). Here's the 411 on how various money management tactics goose up or ding your credit score. More money improves your credit score False. Your level or sources of income don't affect your credit score, although lenders may look at it when making loan decisions, according to the Fair Isaac Corp., the company that issues the commonly used FICO credit scores. Ownership of several credit cards can hurt your credit score Mostly false. Having many credit lines isn't necessarily a bad thing, says credit expert Liz Weston, author of Your Credit Score. Multiple lines give you a favorable debt-to-available-credit ratio. But use them correctly: It's best to keep any balances below 10% or 20% of the total credit line, she says. Anything more will affect the ratio of debt-to-available-credit, which can decrease your credit score. Opening and closing credit lines can hurt your credit score True. New credit applications can decrease your credit score, so be careful about applying for new credit cards or personal loans before applying for a HELOC, second mortgage, automobile loan, or other large line of credit. Surprise: Closing existing credit lines may also hurt your credit score, since it'll damage your debt-to-available-credit ratio. A good rule is not to make any credit changes in the months leading up to a major credit request, such as for a HELOC. Consolidating credit lines will help your credit score Mostly false. Although it may seem like a good idea to move all your balances to one card, that can actually hurt your credit score, since your debt-to-available-credit ratio will spike on that card, says Weston. However, credit expert Harrine Freeman says such a slight decline isn't necessarily a deal-breaker for a loan, especially if the card has a lower interest rate and will allow you to pay off the balance sooner. Your score will increase as soon as that ratio goes down. Changing jobs can hurt your credit score Partly true. Taking a new job or losing your job doesn't affect your credit score. However, if you have a spotty employment history, lenders may hold that against you in making a loan. Dips in income may signal that it could be difficult to pay bills in a timely manner. Co-signing for others can hurt your credit score Partly true. Simply co-signing on a loan for someone else may not affect your score, but if that person is late on paying the loan, it's likely to show up on your report, says Freeman. And that's a nasty surprise if you didn't know the person was late. Judgments and liens aren't considered in your credit score False. If you've had a judgment or lien filed against you, it's considered in your payment history, which represents 35% of your score. Similarly, while most utility companies don't report payment history to credit bureaus, your account will likely be reported if it is seriously delinquent and referred to a collection agency. Additional details on how to manage your FICO score are available on the FICO site (http://www.myfico.com/crediteducation/whatsinyourscore.aspx). Gwen Moran is a freelance business and finance writer from the Jersey shore. She's the co-author of The Complete Idiot's Guide to Business Plans and writes frequently about real estate. What Affects Credit Scores? 7 Misconceptions Article From HouseLogic.com By: Gwen Moran Published: October 22, 2010


Scott Wilkinson Headshot
Author:
Phone: 704-957-0323
Dated: August 13th 2011
Views: 1,867
About Scott: ...

Property Search








RSS Feed

View our latest blog posts in your RSS reader. Click here to access. RSS

Search Blog

Recent Blogs

Feb 5 2016 14602 2 - Dear Homeowners,Here is some
Feb 5 2016 14602 1 - To all Homeowners,The North
How To Choose A Neighborhood When Buying A New Home - Home is where the heart is, but
Energy Saving Tips To Save Money This Winter - It's getting cooler here in the

Saved Properties

This is a list of your favorite properties. We will email you if a property is reduced or leaves the market.

Click 'Save' to add a property to this list.

Register / Login

New & returning visitors please enter your information to login.

By clicking 'register' you are agreeing to our terms of use & giving us expressed written consent to contact you.

Questions? Comments? Complaints?

This message will go directly to the head of our team.

Location & Address

Wilkinson ERA
8604 Cliff Cameron Drive Ste 110
Charlotte, NC
704-326-4095


Other Locations