When it comes to borrowing money from private lenders, a credit score plays a crucial role. It basically indicates your creditworthiness. But you shouldn’t exaggerate its role. Here are the most common myths associated with a credit score.
Myth 1. Getting Only One Credit Score Per Year
Credit reporting agencies aim to create credit reports and credit scores for consumers relying on the information supplied by lenders. However, not every financial reports their information to these agencies.
A lender may inform one agency but leave the other in unawareness. Consequently, the credit reporting agency you select may have insufficient information about your credit score.
Myth 2. You Can Get Your Free Credit Score Per Year
You can claim a free credit report each year if you need to find out your credit score. If you don’t want to pay, you can get a general idea with some credit score estimator tools.
Through online research, you can find some organizations that offer credit scores for free. You can also ask them for exploring your good and bad characteristics as a potential loan taker.
Join Our Small Business Community
Get the latest news, resources and tips to help you and your small business succeed.
Myth 3. Being Employed and Making A solid Profit Bosts Your Credit Score
Your occupation and your income don’t belong to the credit scoring mechanism. You are social status doesn’t matter in this case. Your occupation isn’t necessarily reported to the credit reporting agencies when a lender asks for a copy of your credit report at Filld.loan.
Having a stable job and a good income is crucial to lenders, but it has nothing to do with your credit case. Your credit report only reveals your payment background and credit behavior, so there is nothing about your payment potential.
Myth 4. Your Credit Score Is Not Affected By Divorce
Let’s say that you and your partner take a credit with a joint obligation. A lender will approve your application based on the fact that two people have promised to cover the debt. Just because you break up and get a divorce don’t mean something changes for the lender. You and your ex-partner should decide on your debt obligations. Who will pay it back? When? How? If you don’t figure it out yourself, you remain fully credible for the repayment of that debt.
Myth 5. Bankruptcy Constantly Damages Your Credit
If you go bankrupt, you will still have a bankruptcy record attached to your credit report for several years. During that time, the bankruptcy notation will affect your credit score and make it hard to get a new credit approved https://filld.loan/debit-card-loans/ .
If you struggle with your debts and think about filing for bankruptcy, you should focus on many bankruptcy alternatives. Who knows? This might work out much better for many people.
Myth 6. Becoming Debt Free Will Provide You With a Good Credit Score
When having no debt behind your back, you feel yourself free. And this is a normal reaction. However, it’s not going to affect your credit score. The latter one depends on your credit behavior and payment background, not just the amount of debt that you have.
If you don’t have any active credit, the credit scoring system can’t know how you are currently managing your obligations. If you have one credit card from time to time and pay it off completely every time you receive the bill, then the credit scoring system views you as a responsible borrower.
Knowing how the credit scores work can help you make credit decisions. However, credit scores change regularly. There’s no need to look for your credit score on a continuous basis. By managing your financial resources and current debt properly, you build your score automatically. So you should keep the whole process under control.