Credit Repair Myths - These Will Not Fix Your Credit Reports
Written by: Kristy Welsh
Last Updated: March 23, 2017
Have you ever watched that TV show "Myth Busters" where they prove or disprove commonly accepted trends of thought. Credit Info Center is here to disprove some commonly accepted credit repair practices that are suppose to fix your credit reports and increase your credit score — or not.
Fixing your credit and increasing your credit score takes patience and a clear understanding of the strategies that really make a difference. One goes along with the other, fix all the dings on your credit report and your credit score will go up. It's like peas and carrots, tea and honey, bread and butter, you can't have one without the other. Having said that, you need to understand what financial moves will help and what ones won't when you are laying out your credit repair plans.
Sorry to disappoint, but, there is no quick fix when it comes to fixing your credit despite what you hear from some of those fly-by-night credit repair companies. The key to increasing your credit score is a good payment history along with some time and a healthy mix of credit types. Here are some bogus beliefs that WILL NOT help you build better credit.
Closing All Old Accounts Will Boost Credit Score
Closing old accounts typically won't help your score and could well possibly hurt it. Closing old accounts will shorten your credit history and leave you with a smaller amount of available credit. The length of credit history shows how seasoned a borrower you are, so the more positive experience you have, the better. Having more available credit helps to keep your utilization rate low. The utilization rate is how much available credit a borrower uses; the lower the percentage, the better.
Opening Credit Card Accounts Will Increase My Score
Wrong! Some people believe opening a bunch of new credit card accounts will be proof that they can handle credit. Actually, it has the opposite effect. A lender will wonder why in the world this person needs all of this credit and will interpret this as a sign of a high risk borrower. What the lender will see is a boatload of hard inquiries on your credit report which will negatively affect your credit score.
Paying Off Delinquencies Will Restore My Credit
Well yes, but not as much as you might think. Even if you pay off the delinquencies, the late payments, charge-offs, or collection accounts, they will all still be shown on this account albeit with a zero balance. The trick to this is to have the creditor or collection agency agree to REMOVE the delinquency in exchange for you paying off the account. See our article on Pay for a Delete for more information on this debt settlement tactic.
Paying Before the Due Date Will Help a Credit Score
Paying a credit card balance in full 10 days or one day ahead of the due date will not help your credit score. However, if you pay off the balance before the statement closing date, your report will post a zero balance for that account, which in turn will help your utilization rate, or how much credit you are using.
All Delinquencies Are the Same
If you find yourself in the precarious position of only having enough money at the end of the month to pay on a few debts, make sure you choose the ones to pay wisely. Having a 30 or 60 day late payment on a mortgage or auto loan dings your credit score more than say a late payment on a credit card. Of course, any late payment is bad but if you are in between a rock and hard place, pay your mortgage and car loan on time, if you can.
Get Rid of All Negatives on Credit Reports
In a perfect world, this would be a great thing to accomplish but sometimes there are a few negatives that just will not come off. Rest assured, having a few older dings will not crash your credit score as long as you have some good credit building techniques going on with your newer accounts. Older accounts have less "weight" than newer accounts so keeping the newer ones current is very important to increasing your credit score.
What Have We Learned
Building better credit and increasing your credit score can be shrouded in mystery and myth, but keeping some simple rules of thumb in mind will keep you on the right path. Don't think fixing your credit is going to happen overnight because it won't. Keep your nose to the grindstone and be consistent with a good payment history, diversify your accounts and keep your balances low. Follow these simple rules and your credit score will increase and your credit history will improve.