Credit Score Misunderstandings: Part 2

Credit scores have been around for years, yet credit is still highly misunderstood.  Credit score misunderstandings can hurt your chances of obtaining any loan, including real estate loans.  According to Liz Weston of MSN Money, there are 10 highly misunderstandings.

Here are the final 5 of the 10 highly misunderstandings.  If you missed last week’s first 5, you can read them in the GET REAL Estate Financing’s blog post, Credit Score Misunderstandings: Part 1.

Misunderstanding #6: Paying off debt is bad.
Paying down debt will help your credit score as it will increase the gap between your credit limit and the amount you have used.  

Misunderstanding #7: Overdue medical bills are not bad.
Any overdue bill will hurt your credit score, including medical bills.  If a medical bill is turned over to a collection agency, your credit score could drop drastically.

Misunderstanding #8: Closed accounts will disappear from credit reports.
Negative accounts can stay on credit reports and decrease your credit score for a number of years; while a good account could stay on your report forever, helping your score.

Misunderstanding #9: Checking your credit hurts.
Getting your credit report from federally or legitimately mandated sites do not affect your credit score.  As previously mentioned, you are able to obtain your credit report annually for free.  With doing so, you are able to see if there are any mistakes on your report which then you can fix in order to increase your score.

your credit score and real estate investing

Misunderstanding #10: No need for credit scores to get a loan. 
For most lenders, credit scores are important.  When looking for a loan, if your credit score does not meet their lending criteria, you may get denied or ask for a large amount of money down.

While some people may never want to get a loan, credit scores are still important for other financial aspects including insurance premiums, renting, and down payments.  Take care of your credit score to better your life financially.

Do you have any to add to the list of credit score misunderstandings?  What credit score misunderstandings have affected you and your real estate investments?