Busting 5 Credit Score Myths: What You Should Know When Seeking Bad Credit Loans

By Barbara Marquand
Mortgage Credit Problems Columnist

By now in your research for a bad credit mortgage, you know your credit score plays an important role in whether you get the loan. The higher the score, the better your chances are of getting financing at a decent interest rate.

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But credit score misunderstandings abound. Here are five credit score myths and the truth you should know:

1. Credit repair: Getting copies of my credit reports lowers my credit score.

You won't lower your credit score by requesting free copies of your credit reports. However, inquiries from creditors, such as when you apply for credit cards, a home equity loan, or mortgage, ding your score. That's why experts advise not to apply for credit you don't need just before you go shopping for a mortgage.

2. Bad credit lenders consider only my credit score.

Your credit score is a big factor when bad credit lenders, or any lenders for that matter, consider whether to loan you money. But it's not the only factor. For a bad credit mortgage, for instance, a lender also considers your income, total debt, employment history, size of your down payment, and personal assets.

3. My credit score shows only my mistakes.

Mistakes, such as skipping a credit card bill payment or paying your mortgage late, count against you, but your good handling of credit works in your favor, too. The best things you can do for your credit score are simple: Pay your bills on time, pay down your debt at a reasonable pace, and keep your balances below 30% of your credit card limits.

4. Credit card debt: Closing accounts will boost my credit score.

Closing credit card accounts you don't need might be a good idea, particularly if you've struggled with reining in credit card debt. But closure of the accounts won't increase your score, and could even shave off some points by raising your credit utilization rate--the amount of credit you use compared to your available credit.

5. Paid-off past-due accounts won't affect my credit score.

Your credit report shows that you paid off the account, but late payments and debt collections stay on your report for up to seven years. However, as time goes by, the negative impact lessens if you establish a good payment history.

Understanding your credit score will help you take steps to improve it and get the mortgage you want. To get quotes for a bad credit mortgage, enter your information in the form on this page for free quotes.


http://www.myfico.com/ / http://www.nytimes.com

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