PGCFCU Blog

When it comes to your finances, taking action based on credit misinformation, no matter how slight, can cost you serious money. Decisions based on persistent credit myths may result in low credit scores and even denials. Or, when approvals are made, they can come with double-digit interest rates and unfavorable repayment terms. Fortunately, you’re only a few minutes away from dispelling myths that separate you from your hard earned money.

Let’s debunk three credit myths in three minutes.

Myth #1 - You have only one credit score.

Credit scores are calculated based on information in credit history reports. Your creditors commonly report activity to one or more of the major credit reporting bureaus: Equifax, Experian, or TransUnion every month. Don’t assume that each report contains identical information. Creditors aren’t required to report to each of the credit bureaus. This means your credit history data may differ when you compare each of your reports.

Personal information and credit data in each report might include, but is not limited to, your payment history, account balances, number of accounts, and other public record information such as bankruptcies, foreclosures, and collection activity.

The two main credit scoring agencies, FICO and VantageScore, generate the majority of scores requested by potential lenders and creditors. Scoring agencies only consider the data reflected in your credit history report from one bureau at a time. Each agency can produce at least three credit scores. Therefore, your credit scores may differ depending on which credit reporting bureau data is the basis for the score.

For example, your FICO scores might be different for each of the credit bureaus. Let’s say that within 48 hours, you apply for a mortgage loan at three different credit unions to gauge your best offer. Each credit union might return a different FICO credit score since they requested them from different credit reporting bureaus.  

• Credit Union A requested your FICO credit score using Experian.
• Credit Union B requested your FICO credit score using Equifax.
• Credit Union C requested your FICO credit score using TransUnion.

Myth #2 - Credit scores are based solely on credit accounts like credit cards and loans.

Beginning in 2019, consumers can use their good cash management habits to improve their credit scores. If you have a history of keeping your checking, money market or savings account in the black, then that data should be added to your credit score. You can work with your financial institution to ensure the information is reported. Make sure the potential creditor pulls your credit using the UltraFICO Score, which is the credit scoring version that includes this additional data.

You know you should pay all of your bills on time to build and maintain good credit. But, did you know that your timely rent payments can help boost your credit score? Request that your landlord submit your rent payment history to the credit reporting bureaus. The FICO 9 credit scoring model factors in rent payment information, which can help improve your score if you regularly pay your rent on time.

Myth #3 - Non-credit factors influence my credit score.

It might be tempting to believe that things other than the way you use or misuse credit influences your credit score. This may be the case when inaccurate data is listed on your credit reports, but that can and should be removed by following the dispute policy at each credit reporting bureau. So, what if you’ve confirmed that your credit report data is accurate and your score is still low? The fact is, your credit score is based solely on how you use credit.

The score allows potential lenders to assess whether you’re a good credit risk based on your credit history. Pay each bill on time and keep credit balances to no more than 30 percent of the available credit limit. These two actions have the most significant impact on your credit health. Both show you can pay your debts as agreed and are not in danger of being overextended.

Dismiss these common credit score mythsso you can focus on behaviors that can increase your score like establishing a record of on-time payments with a secured Credit Enhancer Loan. There’s no credit check, and funds in your savings account serve as collateral for the loan. Payments are reported to credit bureaus, which can help improve your credit health over time.