Credit Reports & the Myths surrounding your Credit Score
Auto Source Financial auto loan services have put together the five top myths on the subject of what you should and shouldn’t do to improve your credit score. We’ll try to explain the truth about credit in Canada.
1. Checking your credit score will decrease your credit score
This phrase is false. Checking your own credit report and credit score is known as a “soft inquiry” and doesn’t hurt your credit score. Only multiple “hard inquiries” in a few days from a lender or several lenders can reduce your credit score – but only a few points. Worried about harming your credit core while searching for an auto loan? Be sure to do the research and apply do not apply too many times in a short period of time. The credit experts working with our company evaluate your credit report to ensure you only rebuild and improve your credit.
2. Closing old credit accounts will increase your credit score
Many people recommend closing an old or inactive account to improve your credit score. In most circumstances, the opposite happens. When you cancel an old credit account, your credit history appears shorter and may actually lower your credit score. If you are looking to reduce your available credit level, inquire to have your credit limits reduced or to close any newer accounts you may have. Closing old accounts can help if you are seeking a mortgage loan.
3. Once you pay off a negative record, it is removed from your credit report
Any type of negative credit record such as a collection or bankruptcy stay on your credit report for 7 years after they are filed. Your credit report will have the debt showing as paid but will not be removed from the report. Paying off your debts will improve your credit score, but the major improvement will come once the negative record expires.
4. Cosigning for an auto loan doesn’t make you responsible for the loan
Once you, cosign on any type of financing or become an authorized user on a person’s credit card, you have entered into a legal agreement expressing legal responsibility for the account. Anything on the account – good or bad – will appear on both parties credit report. If you cosign for a relative or friend’s car loan and they don’t make the payments, it will reflect on your credit score. The only way to stop the double reporting is to refinance the auto loan or look to have the creditor officially take your name off the account.
5. Paying off a debt will add points to your credit score
Your credit score takes into account hundreds of factors and values and is calculated using a complex process. It is very difficult to predict how many points you may gain by changing only one factor. A person with a high credit score may have a significant drop by having just one late payment. On the other hand a person has a lower credit score will not have much of a drop at all. The only proven way to improve your credit score is to pay your bills on time, reduce your debts and remove any negative factors or false items from your credit report. The two most important factors on your credit score are Good financial behavior and good credit history.
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