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Common Credit Score myths busted!

A credit score is like a financial character certificate for an individual. A report card of all economic decisions, financial prudence, and choice of consumption. This FICO score between 300 and 850 is under constant scrutiny by lenders, employers, insurers, and surprisingly even landlords. Independent research has shown that half of the Americans still remain oblivious to these scores and its significance in our real life. Misunderstandings, misinterpretations, and misrepresentations must be clarified before any wrong step can create any damage.
The first myth is that different credit bureaus use multiple formulas for the calculation of FICO score when in reality they use exactly the same method. It’s just that the Equifax calls it “Beacon”, Transunion calls it “Empirica” and Experian names it “Experian/Fair Isaac Risk Model.” These are the three major credit bureaus, who receive different patterns of raw data and conversion into scores genuinely would differ. Their analysis might be variable in nature, nevertheless, scores mostly remain close to each other.
Debt payment instantly doesn’t shoot up the scores. The credit score is attributed to the complete history of one’s financial records and any outstanding loan settlement cannot bring a dramatic change overnight. Credit repair takes time, and consistency contributes.
One of the most common misconceptions is that closing erstwhile accounts can boost credit scores instantaneously. On the other hand, closing accounts hurt the credit scores. One needs to open more accounts which would reflect greater financial depth. Furthermore, as credit scores look for financial history, closing accounts make it look younger that can be counter-productive. The best solution can be paying down the existing credit card.
Shopping per se can never negatively affect credit scores. In fact, reckless and irresponsible consumerism can. Credit bureaus are wary of alcoholics. Shopping for loans must be done in the window of 45 days as multiple inquiries by lenders within this period is considered as a single inquiry. Every time a lender makes an inquiry about your credit, scores drop by five points, and hence this window of 45 days must be maintained.
Credit companies cannot fix credit for a fee and it often remains a doubt among borrowers. Information that is already fed to the credit bureaus cannot be changed, that’s obvious, but one can demonstrate assurances of a sagacious management in future. Each bureau has a set of instructions and explanations, that can be followed to ensure a great credit performance. Several agencies offer consultancy to help improve credit scores for a fee, and that could be an idea worth considering.

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