Credit Reports and Scores: Sorting Fact from Fiction

Credit Reports and Scores: Sorting Fact from Fiction

By / State News / الثلاثاء, 28 نيسان/أبريل 2015 04:00

RALEIGH, N.C. : April 15th, 2015 - by Attorney General Roy Cooper.
Keeping track of your credit is one of the best things you can do to stay on top of your finances. But there are a number of misconceptions about credit reports. Let’s tackle of few of them today.
Myth: Checking your credit will harm your credit score.
Fact: This is not true. There are actually two kinds of credit score inquiries. When a creditor checks your score, it is called a “hard inquiry” and it can cause a brief temporary dip in your score. But when you check your own score, that is a “soft inquiry” and doesn’t impact your score at all.
Myth: A larger salary equals a better credit score, while a lower salary leads to a lower score.
Fact: Your score says a lot more about the way you spend money and the way you pay your debts than it does about how much you make. One consumer makes a modest salary but doesn’t borrow too much and has a good track record of making payments on time. Another consumer makes a lot more money but carries large balances on their credit cards and has occasionally been sloppy about making payments. The second consumer’s credit score is not boosted by their salary. In fact income isn’t even included on your credit report.
Myth: Closing old credit card accounts will help your score.
Fact: Old accounts can only hurt your score if they’re carrying a lot of debt. If you want to close old accounts, start with one that you haven’t used in a while and that doesn’t have a balance. Close it, and then wait to see what impact that has on your score. Avoid closing multiple accounts at one time, which can throw off your debt-to-credit ratio and have a large unintended impact on your score. Another alternative to closing an account:  remove the card from your wallet, and store it at home. You won’t be as tempted to use an account if you can’t reach into your wallet for the card.
Myth: Websites advertised online and on television are the best ways to check your credit report.
Fact: Many of those websites will charge you an unnecessary fee. You’re entitled to a free credit report each year from each of the three credit bureaus. To get your free report, go to www.annualcreditreport.com  or call 1-877-322-8228. And here’s a hint: to keep track of your credit at no cost during the year, request a free report from a different credit bureau every four months.
Remember to check your credit reports periodically to make sure they are accurate. If you see something listed there that you weren’t responsible for, it could mean you’re the victim of identity theft.
Myth: A security freeze is only available to people who are victims of identity theft.
Fact: Anyone can get a security freeze, and they are free online. Seniors and identity theft victims can also get them free via mail or phone. A security or credit freeze will stop a crook from taking out credit in your name. When an identity thief applies for credit in your name, the creditor will try to check your credit history but it will be frozen so the thief won’t be able to open the account. When the real you wants to open a new line of credit to buy a car or finance another large purchase, you can temporarily thaw your credit report (using the special PIN code you received when you set up your freeze), so the creditor you are working with can see your credit history. It’s a great way to protect yourself against being a victim of identity theft.
Credit of Debit?
When it comes to what’s in your wallet, consumers have choices. Here are some tips and information to help you understand the differences between credit and debit cards, and which card may be right for you.
With a credit card, you can charge purchases up to the limit set by the company. If you don’t completely pay off what you borrow each month, you’ll be charged interest on what is left unpaid.
That Annualized Percentage Rate (APR), also set by the company, is usually somewhere between 10 percent and 25 percent. The better your credit, the more likely you’ll qualify for a card with a lower APR.
If you don’t pay off your balance each month the company will look at how much you still owe and calculate a Minimum Payment, which is the least you can pay to keep the account in good standing. But try to pay off all or most of what you owe each month. If you only pay the minimum, it will take you a long time to pay off your balance. You’ll also end up paying a lot more, because that interest you’re charged is compounding (building on itself) each month.
With a debit card, your card is linked to your checking or savings account. When you make a purchase or get cash, the money comes directly out of your account, usually right away. Since you aren’t borrowing the money, you don’t pay interest and there’s no bill at the end of the month. However, you may still be subject to fees—especially if you spend more than you have in your account.  For example, overdraft fees can mean that $5 slice of pizza winds up costing you $50.
There are also prepaid debit cards that you purchase and load with a set amount of money.  Prepaid cards aren’t linked to a bank account.
Source: North Carolina Department of Justice.

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