Continuing from 7 Common Myths about Your Credit Score (Part 1), here is some additional information regarding the truth behind some commonly held misconceptions associated with credit scores. If you have additional questions, or if you are looking for some specific information regarding your best options for getting out of significant debt, contact the Law Office of Jon B. Clarke.
Myth 3: When I close a credit card, the account stops aging.
When you open up a new line of credit, that credit card (or loan) will be included on your credit report (and will be a factor in your credit score) from the day on which the account is opened. However, the converse of this is NOT true – in other words, the day you close a credit card is not the same day that the closed account will drop off of your credit report.
Instead, the line of credit will continue to age on your credit report, though the account will be reported as having been closed. While accounts that are closed in good standing can continue to age and be reported on your credit report for up to 10 years, accounts that are closed in bad standing (meaning that a person still owes money to the creditor when the account is closed) typically only age on that individual’s credit report for 7 years.
Myth 4: To build good credit, I should carry some debt.
Wrong! Although you typically need to have credit in order to build good credit, you do NOT need to carry debt for months (or years) in order to establish good credit. Instead, the best way to build good credit is to do your best to pay down (or, ideally, pay off) the debt you accumulate on your lines of credit as soon as possible.
So, for example, if you have a credit card and are trying to build good credit, only using that card for specific purchases and then paying off the entire balance of that card when the payment is due is far better than maxing out the card and only making minimum payments for the next six months or year.
Myth 5: There is a difference between medical-related debt and other debt on my credit report.
Wrong again! Debt is debt, and all outstanding debts that a person owes are listed on his credit report and will be used to calculate his credit score. So, if a person’s debt is related to medical bills, credit cards, student loans or home loans, the fact is that the person owes money to some creditor and that the person’s payment history (e.g., whether the person has made regular payments on time, whether the debt is going down over time, etc.) will matter more than the specific type of debt.
Be sure to check out the final installment of this blog for some more information about the truth behind some of the most common myths about credit scores.
Colorado Bankruptcy Lawyers at the Law Office of Jon B. Clarke, P.C.
If you are overwhelmed by seemingly insurmountable debt and are looking for a financial fresh start, contact the trusted Colorado debt relief and bankruptcy lawyers at the Law Office of Jon B. Clarke, P.C. For more than 35 years, Mr. Clarke and his diligent support staff have been successfully helping our clients resolve even the most complex bankruptcy cases for both individuals and businesses alike. Our experienced legal professionals are committed to providing each of our Clients with the personalized debt relief assistance they need, and we will work tirelessly to ensure that our Clients’ cases are resolved as favorably and efficiently as possible.
For a thorough assessment of your situation, along with expert advice regarding the best manner in which to move forward to unburden yourself from debt, call us at (866) 916-3950 or email us some details about your situation by clicking here.