Your credit score plays an important role when you need credit but there are many credit myths. These scores give you the idea to lenders regarding how you handle money and debt, and your likelihood to make payments on-time.

It is good if you have an exceptional credit score but many of us don’t have excellent credit. But there are many ways to improve it. But there is still a lot of misinformation when it comes to credit repair. These credit repair myths are more harmful because they make you focus on things that have little importance.  Some of the more popular myths are like “credit repair is illegal” or “credit repair doesn’t work” are not true. Well here’s what you need to know if you’re considering working on repairing your credit.

6 Common Myths Regarding Credit Repair

If you have not the perfect credit history then you’re definitely not alone. But if you’re looking to boost, improve or repair your credit score then you need to understand these things:-

Myth 1: Credit repair doesn’t work

The truth is that with a little effort, follow-through, and persistence any credit report can be repaired to some extent even if one item is removed. However there can be much greater results and some result is certainly better than no result at all, especially when it comes to the credit reports.

 

Myth 2: Opening many lines of credit will increase your credit score

While having a handful of credit accounts on your report shows you can handle the responsibilities of multiple bills and accounts whereas adding more than a few lines of credit not essentially help your score. Despite the help, too many lines of credit create unnecessary risk and may actually hurt you.

When you apply for any new loan or credit card, the bank does an official credit inquiry on your credit report. The credit bureaus keep a record of these hard pulls. If you receive too many of those hard pulls in a short span of time then they begin to negatively affect your credit score. It is because lenders believe that you’re looking to overextend yourself. But yes, Soft pulls do not affect your score.

If multiple lines of credit tempt you to spend more, you could likely suffer. A high utilization ratio signals that you’re overspending.  Due to this, you may drag down your credit score even if you’re making all of your payments on time.

 

Myth 3: Closing credit accounts will increase your credit score

Not necessarily. Many people think that closing all of your accounts may be a way to boost your credit score because you won’t be over-spending. But it can actually hurt it. A credit score is partially determined by how the borrower can handle the money. If the accounts are closed, then it can harm your credit score.

Myth 4: You have to hire a law firm or credit repair agency to repair your credit

Although in many cases it is more effective and easy to do under guidance under federal law, you can do it yourself. You can also choose to represent yourself in a court of law. Although in most cases repairing your credit can be time-consuming and frustrating. An agency or firm that has experience with the inclusions and exclusions which can save a whole lot of time and effort and many times is worth the modest fee they charge.

 

Myth 5: The score will be perfect by removing all the negative items on the report

The truth is that there are various factors that determine your credit score such as debt you owed, payment history, etc. Removing accounts with late payment from your credit report will have a positive impact on your score but there’s no real way to “remove” a legitimate account other than waiting for a long time.

By removing all the negative items may not give you the perfect score. If you have an account that is several years old and has a late payment or two a few years back then it may be a better idea to leave the item alone.

 

Myth 6: By paying off delinquent accounts and making all payments on time will improve the score by itself

Well, both are both good steps. But the fact is that just because a delinquent account, or even an account that has gone to collections, has been brought current and paid off doesn’t necessarily mean it will no longer hurt your credit report. These items can continue to be reported in the reports for up to seven years. And although making payments on time is always a good idea, so you should do so. But the effect will show after a long time.

 

To sum up

Building a good credit score takes time and there are very few shortcuts. But yes you don’t need to spend hours fixing the problem. Just follow the basics:

  • Don’t apply for more than two or three credit accounts a year, if you can help it.
  • Pay every bill on time.
  • Keep your credit card balances low in relation to your credit limit.

Related Topic: Reasons Your Credit Score Can Suddenly Drop