The term “credit score” like many other financial terms has many myths associated with it that can sometimes mislead and misinform the general public. A person’s credit score is, at its most basic level, a three digit numerical score used to reflect a person’s reliability when it comes to paying back their creditors. This score is important because it is used by financial institutions and money lenders to determine and assess the likelihood of receiving back with interest the money they lend out to people. A good credit score will often provide the lender with the security they prefer to approve a loan to an individual while a bad credit score will often cause a lender to deny the issuing of a loan to a person who has been shown to be less reliable in paying off their debts.
Reviving loans from lenders is often seen as a necessity whether that loan is a small payday loan or a substantial home mortgage. Because of this, people wish to retain a good credit score that will help them to receive loans in order to help them provide a stable financial future. However, many people are at times lured into believing varying myths about credit scores and what can affect them.
One main myth concerning credit scores is the false believe that paying off all debts will instantly clear a person’s credit score of its poor marks and make the credit score instantly immaculate. This is not the case. While paying off debts will certainly help a person’s overall finances and will, over time, positively influence a credit score, the past cannot be changed and habits that have led to a bad credit score cannot be erased from a credit score’s record.
A second and main myth surrounding a person’s credit score is that a person’s credit score will suffer if that person attends a credit or debt management programs offered by debt management companies. Attending one of these classes can be extremely beneficial to individuals who are struggling with managing their debt and will have no influence on their credit score.
These myths and others like them can cause more damage than good to debtors looking to improve their credit score. Education on the topic of what is and what is not included into a credit score is the best way for individuals to improve their existing credit.