When it comes to debt, credit reports, and credit scores, there are always a lot of misunderstandings and misrepresentations. Want to know the real truth about these important for every borrower concepts? Read this article carefully and you'll find out what your score really depends on, who and how creates a credit report, can a credit check damage your score or not, and many other useful things. Don't fall for the following myths:


How much would you like to borrow?

Not all debts are the same important for your credit history. There is a big difference between a credit card debt which appeared due to your being under the weather and wasting $100,000 on a luxurious Meditarainean cruise, and the mortgage debt which is unavoidable part of everybody's life. Borrowing for improving your living conditions or health is essential and understandable, which can't be said about partyingm showing off or the same.

It's both true and false. Of course, any inguiry, or credit check, both hard and soft is reflected in your credit report. But there's nothing harmful if you just wanted to check the report out of curiosity.  An inquiry can affect your score only if it's related to applying for a loan. In this case the score may fall as any borrowing money presupposes the chances of getting in debt.

Actually, the credit score depends not on the amount of credit you have but on the amount you use. And if you close the card you are likely to dicrease the total available credit which is also known as "credit utilization". It may even lower your score. Of course, if the temptation to spend money from every open credit card is too high you can't resist it, maybe you'd better close it. But we advise to learn to take a hold of yourself.

There is no unique formula to measure your credit score. Neither is there just one type of score. They are hundreds and they are different for each consumer in every peculiar situation.  The most popular one which most lenders rely upon is FICO score (Fair Isaac Corporation) score. It’s based solely on your credit report and is determined by such factors as payment history, current level of indebtedness, types of credit used, length of credit history and new credit accounts. It ranges between 300 and 850 and divides all the borrowers into 5 groups: poor, fair, good, very good, exceptional.

Your credit score is given to you by one of the three main credit reference agencies (Equifax 1, Callcredit 2 and Experian 3). It shows you how your credit report will look to lenders (the higher the score, the better it looks). 

Lenders  check your credit score for different reasons, and each of them takes into account different factors giving more weight to this or that item depending on the situation.

Credit bureaus collect information about your previous debts, payment history, the age of credit history, types of credit and the number of inquiries made 4 and use that information to measure your credit score. It's not just bad or good. It just shows the degree of risk yoou may present to the lender.


How much would you like to borrow?

Most companies consider this gradation of credit score introduced by FICO:

Credit title  Poor  Fair  Good  Very good  Exceptional 
Credit score  300-579  580-669  670-739  740-799  800+ 
What does it mean?  You may be rejected.  Or you may need to pay a fee or a deposit.  To get approved may be rather difficult and the rates are likely to be higher.  You are an “acceptable” borrower.  You may get better interest rates from lenders You will be easily approved for a loan. 


The only thing that affects your credit score is a credit report. And it doesn't include any information on your job, education, income or weight or height details. It specializes on the credits you had and the way you managed (or didn't manage) them. Your job can influence the score only indirectly. No job - no money - no ability to pay off the debts. So get up from a couch, switch off the TV and go find work. 

Your origin, religion, race, sexual orientation, hobbies and other private information are not listed in your credit report. And whatever is not stated there can't influence your score anyhow. It's not hard to make a conclusion that your demographic can't affect your credit score.

Every credit report is individual as are your fingerprints. It's linked to your Social Security number. Even your spouse or any other beloved person can't share it with you. If you buy something together or take out a loan together, these things will appear in the report of each of you. Share your love and life, but not credit report!

Of course, you mst pay off your debts and you'd better do it on time. But as soon as you've done it the evidence of debt doesn't disappear. It stays in your credit report for up to 7, even 10 years. And it's not always bad. All due payments are a positive history able to raise your score. I can't say the same about consistent late payments, overalls, defaults, etc. They won't do you any good. 

There is no "magical company" which will raise your credit score with the help of just one move of a magic wand. They can teach you, give some necessary information, or help plan your budget more carefully. But it's all up to you to affect your score. Follow the most important advice and your score will skerocket:

  • make payment on time
  • increase your credit limit
  • apply to different types of loans and show you can handle them

Credit scores can say how risky a borrower you are but they definitely don't measure you as a reliable friend or loving mother, etc. If the score is low it's only because your credit history is far from perfect. You may have made some mistakes planning your finances. But it doesn't mean you are a bad person. I doubt "credit score" is on the list of anyone's criteria to choose a perfect spouse. 

  • Payday Loans $100 - $1,000
  • Personal Loans $1,000 - $35,000

So, pay bills on time, reduce balances and apply for credit only when you need it - and everything will be fine, including your self-esteem).