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Tag: Credit Monitoring

Credit Score Myths to Stop Falling For Now

Written by support@seostats.com on . Posted in Credit.

There’s a lot of misinformation out there about credit scores and what can bring them down. Most people are really concerned about this, and the myths that circulate almost border on the superstitious.

They include taboo things you’re not supposed to do with your credit, rituals that are supposed to help boost your score, and flat-out falsehoods about how your credit score works.

Let’s cut through the noise and get to the truth about your credit score. Here’s what you should know — and the myths you need to bust.

 

What to Know About Your Credit Score

Your credit score is a metric that financial institutions like banks, credit unions, and mortgage lenders use to evaluate how “creditworthy” you are. Your score is supposed to indicate how likely you are to repay (or default) on money you borrow through a loan or put on a revolving line of credit.

When you apply for a loan, mortgage, credit card, or other type of financing, the lender or institution will pull your FICO score to determine that creditworthiness factor. The better your credit score, the more likely the lender will offer you the lowest interest rate available since they feel confident you’ll repay your loan on time and in full.

The lower your score, on the other hand, the more likely you’ll have to pay a higher interest rate. The interest rate is like a fee that you pay for the privilege of borrowing money and repaying it back over time. The lender will require you to pay a higher fee if your credit score is low because, statistically, they’re taking on more risk by allowing you to borrow money.

Credit scores range from 300 to 850, with anything over 800 being considered the best-of-the-best, and anything falling below 629 as bad or poor. Getting your credit score in the 700s is the goal for most people, as that will help land you in the good to excellent range.

But don’t panic if you’re not there yet.

 

The Biggest Myth of All? Your Credit Score Is Not the End-All Be-All

Yes, a good credit score is important and increasing your score (or maintaining it in the 700 to 800 range) is a worthy goal. But no one is giving you a gold star or cutting you a check if your credit score is good to excellent; it just means you might have an easier time getting approved for financing.

You’ll also pay less for financing when you need it — but if you don’t have much of a need for new credit or loans, a lower credit score probably won’t impact you very much. Plus, with a little time, you do have the power to raise your score so it’s in a better place when you do want to consider a loan for something like a new car or mortgage.

Some of the best ways to improve your credit include:

  • Making all payments on existing accounts and balances on time and in full.
  • Avoiding opening and/or closing a lot of accounts all at once.
  • Repaying existing loans and wiping out balances.

These tips bring us to the other 3 credit score myths that you need to bust, before they lead you to do something silly or even harmful to your credit.

 

What You Only Think You Know About Your Score Can Hurt!

If you’re believing one of these 3 mistruths, it’s time to get the facts straight and understand what truly impacts your credit… and what’s little more than financial legend.

 

Myth 1: Checking Your Own Score Will Hurt It

You might have heard that having someone pull your credit will cause your score to drop. This is only partially true, and only in certain situations.

Credit checks come in two flavors: hard inquiries and soft inquiries. Soft inquiries do not hurt your score. Checking your own score counts as a soft inquiry, as does getting something like preapproval for a mortgage.

Hard inquiries, on the other hand, can ding your score — but they’ll usually only drop that score by 5 points or so, and your score can recover over a period of time if you continue practicing smart credit management habits.

Hard inquiries are required when going through a financing or underwriting process. They’re unavoidable at times. Just make sure that if you need to have multiple hard inquiries into your credit (such as when comparing quotes from various lenders), those institutions pull your credit at the same time.

Hard credit checks done within a small window (usually 14 days, but sometimes up to 45) will only count as one inquiry rather than several.

 

Myth 2: You Need Different Types of Credit to Have a Good Score

You might have also heard that your credit score is partially determined by your “credit mix,” or how many different types of credit you have.

While showing that you can manage different types of credit — like revolving lines, such as credit cards, along with installment loans, like a car payment — does factor into your credit score, it is not necessary for you to have various loan types in order to get a good credit score.

Making your payments on time and in full weighs far more heavily in the calculation of what your score should be, so this should be your main focus. Another factor is credit utilization, which means the amount of credit you use versus the amount of credit you actually have. You want to use no more than about 30% of your available credit at any one time.

Focusing in these areas will help you boost your score over time. Don’t think you need to take out something like a personal loan just to improve your credit score; you can build your score through other ways that won’t cost you money (via the interest you have to pay on a loan you don’t even need).

 

Myth 3: Carrying a Balance Helps Your Credit

On a similar note, carrying a balance on your credit card will not help your credit score. In fact, it can hurt, considering that your total balance amounts are a factor in determining your score… and if that total doesn’t go down over time, it doesn’t reflect well on your ability to manage credit and debt.

Carrying a balance only causes you to pay more in interest. Again, focus on other, productive ways to build credit and boost your score, like keeping credit usage lower than 30% of what you have available and never missing payments.

 

Conclusion

Your credit score is an important piece of you overall financial well being. Knowing what really makes positive (or negative) changes to it is smart. However they are many more critical parts of your financial health (such as spending, saving, investing) that should be given a much higher priority.

Have You Taken Steps to Protect Your Credit?

Written by support@seostats.com on . Posted in Cyber Security.

It may seem like forever ago, but it was only a little over a year (Sept 2017) when we were all shocked by the major Equifax Data Breach. The breach resulted in more than 145 million people’s personal information, like Social Security numbers and birth dates, being compromised. That is almost half of the entire United States! And, yet, even more worrisome, AARP found that just 14% of the 2,000 compromised individuals it surveyed actually took steps to freeze their credit.

Unfortunately, when such alarming events happen in our country, public outcry and individual focus peaks relatively soon after. The steps that should have happened to help add additional safety measures going forward, both on the individual and government level, didn’t happen. Unfortunately, not much has changed at all over the course of thirteen months.

The good news is that free credit freezes are here as of September 21, 2018, due to new federal laws.

Take this One Step

In April, I wrote about a friend who had been hacked and the 7 steps you could take to help prevent it. Arguably, the most effective thing that you can do to protect your sensitive personal information is to freeze your credit. It’s the equivalent of locking your doors and windows at night. Now, of course, an intruder could still get it if they wanted to, but you make it much more difficult for that to happen.

Freezing your credit makes it much harder for someone to use your information if it gets stolen. Opening accounts in your name or borrowing money in your name becomes very difficult. If you freeze your file, the bureaus will not provide information to lenders unless you personally “thaw” the freeze first, using a special personal identification number.

How to Freeze Your Credit

For a credit freeze to be effective, you will have to freeze your credit with all three major credit reporting agencies: Equifax, Experian, and TransUnion. Each of the credit agencies offers instructions and steps you can take to freeze your credit with them, but here is what you will have to do:

1.      Get in touch with all three major credit bureaus individually: Equifax, Experian and TransUnion.

2.      Provide your personal information via their online forms. You can also call them, or send them a letter. This will create your credit freeze account.

3.      Keep your security pin in a safe and secure location (you’ll need this to lift the freeze)

4.      Give yourself up to three days to thaw your credit once you think you’ll want to start using it again

Locking Your Credit vs. Freezing It

Not everyone is comfortable with the idea of freezing their credit, so they may opt to lock it instead. Like a freeze, a credit lock prevents most lenders from accessing your credit and protects it against fraudulent activity. The primary differences, however, are that credit locks may be a bit more convenient but may have a monthly fee attached. You can lock and unlock your credit at any time, so you don’t have to wait up to the three days it can take to “thaw” your credit when you freeze it.

 Locking your credit is ideal for anyone who knows they will need frequent access to their credit or who wants more flexibility in locking and unlocking access. If you know you won’t need to use your credit anytime soon, freezing is the most thorough way to secure your sensitive personal information.

Conclusion

Don’t allow complacency to leave you vulnerable to a cyber hack. Protecting your identity is within your control, right now, by taking this one simple step. If you are one of the 145 million Americans whose sensitive personal information was compromised because of the Equifax Data Breach, know that you can take measures right now to “lock your front door” and guard your sensitive personal information against being used illegally.

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