Nine Credit Score Myths

Nine Credit Score Myths… Do More Than Good.

When purchasing a home with Paran Homes, we all know how important our credit rating is when obtaining a mortgage. Your credit score has a direct impact on interest rate, payment, and in some cases whether you can qualify for a mortgage. There are many myths about how to maintain credit and some of these myths can cause more harm than good. Below are nine credit score myths that can impact to your credit score as oppose to helping your credit score.

1. Closing out old, active accounts will help your score:
Your credit score is partially based on our length of credit history and your utilization rate. By closing old accounts, you can make your credit history appear shorter and as a result actually decrease your score. It can also reduce the total amount of available credit, which can also affect your score.

2. Opening (but not using accounts) will help your score:
Your credit score is affected by how well you manage the credit you do have over a period of time, not by how many credit cards you have with available balances.

3. You should avoid using your credit cards at all:
If you’re not using your credit, you’re not building credit history. Use your credit cards from time to time and promptly pay off the balance.

4. Dispute letters can clean up your bad credit:
Dispute letters may force the removal of negative items temporarily, but once the lender can prove the records accuracy, it will reappear on your credit.

5. Paying off old debts and judgments will help your score:
Don’t expect a “negative” to disappear by paying it off. Negative records remain on your credit for 7 to 10 years, regardless of any remedies you made.

6. Credit inquiries hurt your score:
Inquires alone do not make a big enough change in your credit score to make a difference when it comes to lenders.

7. Using a credit counseling service lowers your score:
Credit counseling services no longer figure into the FICO scoring system. So although your report might indicate you are receiving credit counseling, using those services won’t lower your score.

8. There’s a set formula for obtaining great credit:
Credit is a very individual thing. Credit scores look at everything and take it all into account.

9. You can get a perfect score:
Getting a perfect score of 850 is nearly impossible. Your credit score is a reflection of your credit risk and regardless of your credit history. There is always a risk.

As one of Paran Homes preferred lenders, we thank Kevin Haynes of FBC Mortage for the article on how we can all improve our score when preparing for your new home. For more information or if you have questions, email