The Truth About Your Credit Score

Posted on: May 4th, 2010 by

Financial Planning - Rockville, MDYour credit score is that pesky three digit number that represents your credit-worthiness and how reliably you will pay back money you borrow.  This may seem simple enough, but credit scores are not always intuitive.  Even when you think you are doing the right thing, financially speaking, you could still be hurting your score.  People assume that once a debt is paid off it will drop off their credit score, when in fact this is far from the truth.  Late payments and other negative blemishes stay on your credit report for 7 years from the date of the initial late payment.  Bankruptcies will stick around for 10 years from the date you file.  Although these things are on the report for many years, the effect they have on  your credit report will lessen over time.

It is very important for you to keep an eye on your credit report, as the reporting bureaus do make mistakes.  It has been estimated that 8 out of 10credit reports contain a serious error or some sort of mistake.  To take a look at your credit report for free, and dispute errors online, check out  When you pull your own credit for educational purposes, it will not effect your score, as many have said, because it is a “soft inquiry”.  Your credit is however effected when your credit is pulled by a creditor or lender for the purpose of giving you a loan or issuing you credit.  So, check your credit report yourself regularly.

Also, if you have credit or can get credit, you should.  Yes, using all cash sounds like the responsible thing to do and you can easily track your spending, but that doesn’t help your credit report.  If you are not using credit ever, you have not demonstrated that you are capable of using credit responsibly, therefor your score will be lower than someone who does.

And finally, beware of credit repair companies claiming they can get negative information removed from your credit report.  This practice is illegal and generally scams.  Its better to discuss with a financial adviser what to do about cleaning up your credit report and paying off debts if that is your goal.  To have inaccurate information removed from your report, file a dispute with the credit bureau and they have 30 days to conduct an investigation.  If the dispute is valid, they will immediately remove the false information from your credit report.



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