Posted: 10 Aug '16

Common Myths About Credit Scores

Common Myths About Credit ScoresUnderstanding how credit scores work can be confusing and make it difficult for you to maintain a good score. As bad credit lenders, we have seen many clients with good intentions struggle because their credit rating is too low to borrow money. Here are some of the most common myths about credit scores that we've heard from our clients.

Holding too many credit cards lowers my score.

Cancelling cards that show a good payment history can be more damaging than having multiple cards. When you close a credit card account, the entire account is removed from your credit profile. It is better to ensure your balances are under 75 percent of your credit limit and your payments are made on time each month, that way your cards remain on your credit profile.

I should have good credit because I pay my utilities and Internet on time.

Unfortunately, the only time utilities and service companies affect your credit is when you do not pay your bill with them. Your good payment history doesn't show up at all, just that you defaulted on paying. You might not realize that traffic tickets and bylaw fines are also reported against your credit score if you fail to pay them.

Checking my credit score will make my score drop.

This isn’t true and if you do not check your credit score regularly, you may not notice errors or potential identity theft. There are two types of inquiries for credit: hard inquiries and soft. A soft inquiry is when you check your own report or if credit card companies pre-qualify you for a credit card. These types don’t affect your credit, however, hard are performed when you apply for credit and they do affect your score. A lot of hard inquiries acts as a warning to potential creditors that are seeking credit from many sources and may suggest you have recently received credit that has not been recorded yet.

My payment is late this month, no point bothering now.

The fact is, if you're consistently on time with your payments and run into a snag, most creditors are more than happy to work with you. In many cases, if you approach the lender in a timely manner, the late payment can be removed from your credit score. This is not something you want to make a habit of doing.

We hope that clearing up these common myths and providing you some information you can work with can help you with managing your credit. If you need help to consolidate your debts or you are trying to rebuild your credit, look to us at BMC Mortgage & Investments. We are experienced bad credit lenders who understand that life happens. Contact us today.