Credit Score Myths

Credit scores are being used for everything these days, including mortgages, credit cards and even employment decisions.

Everyone wants a high one, but many consumers are operating on bad advice on how to get one.

Your credit score is a number that represents everything on your credit report and more. A company called FICO calculates them and the scores can range from 300 to 800 -- the higher the better.

What many people think will help increase their score, really won't. So let's get to the myths:

If you've had a financial blunder in the past, you're doomed for seven years, right? Wrong. They will stay on your credit report for up to seven years, but as for your credit score, the last year of your financial behavior is the most important and will be weighted the most. So, if you have been good for the last year, you should be able to get some good deals.

Next myth: Only people with a lot of money have high scores. Not true. FICO says that income is not even a factor they use when calculating scores.

In fact, their studies have shown that most people with the highest scores do not have the highest incomes.

What about closing accounts you don't use? Will that raise your score?

This may come as a shock, but it won't. FICO says that having open accounts you don't use or an available line of credit will not lower your score. FICO also says that you should keep some unused accounts open if you have others with high balances.

FICO has said for years that it is better to have more credit cards with moderate balances than to have a few with high or maxed-out balances.

Using a credit counseling or consolidation program will send your credit score south right?

Nope. FICO says that being on a program does not play a factor at all in calculating your score. Being in a program will most likely be stated on your credit report, but it has no effect on your score as long as you are making your payments on time.

Now for things that will definitely help your score:

Try to keep your credit card balances as low as you can and pay your bills on time.

Check your credit reports. Make sure they are accurate. Remember that your score is based mainly on what those reports say.

For more information about how your credit score is determined, visit the FICO Web site at www.myfico.com.

How To Increase Your Standing

Financial Blunders Won't Necessarily Hurt You For 7 Years