I see this happen all the time: people unknowingly damaging their credit score because they don’t understand how their score is factored, or what exactly influences the number. Things like closing a credit card account after it’s been paid off, or going after the credit cards with the freebies–even if that means having 5 or 6 open credit accounts, all of which have hit your credit when they checked you out for eligibility. But then, there’s just the key components that make up a credit score, the specifics which most people are surprisingly a bit hazy about. Ashlea Ebeling of Forbes jotted down five of the biggest credit misconceptions, and how they can hurt a consumer, taking care of course to counter those with how to make the credit system work in your favor:
“Key factors about credit scores continue to be widely misunderstood, and the misconceptions are potentially costing consumers tens of thousands of dollars, according to a conference held today by the Consumer Federation of America and VantageScore Solutions, a FICO competitor.
“People who fail to understand exactly what can impact their score have little incentive to manage the things that can truly make a difference,” said Barrett Burns, president and chief executive of VantageScore Solutions.”
Click here to read about the key factors that can affect your credit score, and which ones are often misconceived.
Fun fact from Ebeling’s article: on a standard 60-month auto loan taken for $20,000, a consumer with a poor credit score would pay about $5,000 more in interest charges than a borrower with a really good score. So literally, having a good score is like money in your pocket.