December 08, 2009
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'POP!' Goes the CC Score Myth, Pt.3
Direct or indirect effect.Again, much of the confusion when trying to second-guess credit card lenders involves lack of definition. Generalizations in credit card reality don't seem to apply very well these days. Another common myth was not always a myth:
Myth 4: Shopping for loans will hurt your credit score: Not so long ago, there was substantial risk when shopping around for the best credit deals. Today, this still applies to credit cards. Called a "Hard Hit", a person's credit score can take a pounding when a serious inquiry is made concerning their credit report. But now, a provision has been implemented for big ticket items like mortgages, car loans and student loans (thank goodness).
A little common sense and wisdom has finally risen to the surface. Lenders have come to realize that people who shop around when significant finances are in play also act more responsibly when it comes time to pay those debts off. So, now there is a provision allowing unlimited loan applications for a month, or so, when embarking on a new major debt. Certainly, you should shop around for the best term on a new major debt. Again, however, this still does not exempt credit card applications. Your score will take a hit for each new credit card app.
Myth 5: Employers use credit scores: Again, we suffer for lack of definition. A credit card score would be of little use to a prospective employer unless you were requesting a loan from that employer. That said, however, a peek at your credit report can tell a prospective employer everything it needs to know about you (especially if it's bad). The finer definition is the distinction between between an indexed number predicting your ability to pay back a loan (for whatever unspecified reason) and an exhaustive ten-page commentary covering your last 7 years of financial behavior (or, at least, what dozens of different unrelated entities are saying about you). Your credit report can have a direct effect on your ‘employability' while your credit score should have little. Be sure your credit report is accurate. If it isn't, it may be worth your while to contest the 'derogatories' that others have accused you of.
I've found that many collection agencies love to lie and say terrible things about you because they enjoy it. If theirs is the only voice, who's to believe? Check your credit reports for free at: Annualcreditreport.com