Credit Score Myths - Real Answers, Real Resources from American Financial Solutions

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Finding accurate information about credit scores can be like looking for a needle in a haystack. Credit counseling agency American Financial Solutions offers real information about managing credit scores as well as where to find answers.

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American Financial Solutions

Carrying a balance on credit cards does not help your credit score.

On May 29th, 2012, American Financial Solutions (AFS), a non-profit credit counseling agency, participated on a panel discussing ways to improve credit score education. The guest was Craig Watts, Public Affairs Director for Fair Isaac and Company (FICO) and the discussion was led by Gail Cunningham, Vice President of Membership and Public Relations for the National Foundation for Credit Counseling (NFCC). From that discussion it became apparent that there are many myths surrounding credit scores and it can be difficult to find reliable information. Listed below AFS lists some of those myths as well as the truth on how they impact your credit score.

1. Closing a credit card will lower my credit score. This is one of the most common misconceptions about credit and credit scores. It was once true that closing an account would remove it from your score. That is no longer correct. A closed credit card can remain on a credit report for up to 10 years as long as it is in good standing. It may remain longer if the creditor continues to report it.

One more point on closing a credit card. According to FICO, one of the most widely used credit scoring models in the credit and lending industry, 30% of your credit score may be comprised of your credit usage-to-credit limit ratio.

For example, if you have two credit cards, each with a $1,000 credit limit and one of those has a $1,000 balance avoid closing the empty card. A $1,000 balance / $2,000 credit limit gives you a usage ratio of 50%. This is already a little high. If you close the card with a zero balance that usage ratio increases to 100% - an amount that will do damage to your score.

2. Checking my credit report will lower my credit score. The reality is that you can check your credit report as often as you like. You are only allowed one free credit report each year, from each credit bureau via However, you can pull you report directly through the credit bureaus as well. There will be a charge, but no damage to your credit.

3. Leaving a balance on a credit card and making small payments helps to improve your score. This is false. In order to optimize your credit and your credit score, it is important to keep balances on credit cards at or below 30% of your available credit limit. In addition, keeping a balance on a credit card will result in paying more interest to the creditor, because you are borrowing the money over a longer period of time.

4. Spouses have joint credit scores (and credit). When you are married or jointly applying for a loan or a credit card, lenders will review the credit of both applicants. However, credit reports and credit scores are created on an individual basis. They are not joint records; your information is kept completely separate.

5. Making payments on debt held by a collection agency will improve a credit score. Collection agencies do not show a payment history on a credit report. The account is marked as either paid or unpaid. A paid collection agency account is better than an unpaid account, but it will not help improve payment history. That is why it is so important to make arrangements with creditors before an account is sent to collections.

6. You only have one credit score. The reality is there are numerous credit scores and different industries have different models. A mortgage lender may use a different scoring model than an auto lender. The auto lender may use a different scoring model than a credit card company.

In addition to that, if you have different data in your Experian credit report than you do in your Equifax credit report, it will create differences in the score.

Navigating credit reports and credit scores can feel confusing and frustrating at times. Most people receive their information about credit and credit reports from friends and family who mean well, but may not have all of the information. Contact a certified credit counselor today or visit to learn real ways to manage credit, debt and budgets with successful results.

AFS is a non-profit financial education and credit counseling agency and member of the NFCC and the Association of Independent Consumer Credit Counseling Agencies. AFS is accredited by the Council on Accreditation. Join us on Facebook, Google+, Twitter and Pinterest.

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Becky House