If you have less-than-good credit, your score could easily wind up casting long shadows over your prospects for spring and summer fun, not to mention your bank account balance.
Estimates from the two leading credit-score providers indicate that the changes will benefit roughly 12 to 20 million people. (Thinkstock)
Estimates from the two leading credit-score providers indicate that the changes will benefit roughly 12 to 20 million people. (Thinkstock)
The weather is warm. The birds are chirping. And flowers are in full bloom. So the last thing you probably want to be thinking about is your credit score. But if you have less-than-good credit (usually defined as a score below 660), as roughly 45 percent of people do, according to WalletHub data, your score could easily wind up casting long shadows over your prospects for spring and summer fun, not to mention your bank account balance.
So a seasonal refresher course may come in handy. In particular, it’s important to point out which commonly held beliefs about credit scores are actually inaccurate. Credit scores are ultimately quite simple, after all. They’re based on the contents of your major credit reports and depend heavily on your payment history. But it’s easy to wind up way off course if you buy into certain key misconceptions.
Myth 1: You can get the score major lenders use. Most lenders, particularly credit card companies, don’t use over-the-counter credit scores to evaluate applicants. Instead, they use their own in-house scores, which may or may not factor in one or more publicly available scoring models, along with various proprietary metrics.
There are two lessons to take away from this. For starters, it’s impossible for there to be one “real” credit score if all the major lenders use their own unique credit-scoring models. Additionally, since you can’t get the exact type of credit score a given lender will use to evaluate your application, it doesn’t really matter which type of free credit score service you get. Just make sure it’s reputable and truly free, and that it updates your credit data frequently. You don’t want to be making financial decisions based on outdated information.
(Thinkstock)
Thinkstock
Myth 2: Anyone can see your score. You may have heard something about the U.S. having low financial literacy levels, but this part is really worrisome: Roughly one-third of people think anyone can view their credit reports and scores, as if the information were publicly available, according to a nationally representative WalletHub survey conducted in 2016. That includes 41 percent of people with bad credit, who are likely to be most at-risk. More than 45 percent of people also mistakenly assume that the government has the right to their credit information.
To be clear, an individual cannot simply check another person’s credit report or score without permission. In fact, the inquiring party — usually a lender, landlord or employer — must have a “permissible purpose” for checking, according to the Fair Credit Reporting Act.
(Thinkstock)
Thinkstock
Permissible purposes include:
— You apply for a loan, line of credit or insurance policy.
— A lender evaluates whether you continue to meet the terms of an account.
— There is a legitimate business need, and you initiate the transaction.
— You apply for a government license or benefit that requires financial assessment.
— You have debt in collections.
— You owe child support.
— You give written permission to an employer (credit report only) or other party.
Contrary to popular belief, employers can’t check your actual credit score. But if financial responsibility is relevant to a position, a company may request permission to view your credit report. Make sure to carefully read any forms presented to you during the application process.
(Thinkstock)
Thinkstock
Myth 3: People don’t care about credit scores. Credit scores may once have been considered a novelty, but folks now seem genuinely committed to improving theirs. For example, the percentage of people who’ve checked their credit score at least once in the past 12 months increased from 48 percent in 2015 to 56 percent in 2016, according to the National Foundation for Credit Counseling.
And then there’s the 32 percent of people who would get an “I Love Credit Scores” tattoo in exchange for a lifetime of excellent credit, according to WalletHub survey results. In fact, 7 percent would even name their first-born child “Credit Score.”
This shouldn’t really be a surprise, however, considering that good credit can easily save you thousands of dollars per year by lowering your interest rates on consumer debt.
(AP Photo/Paul Sakuma, File)
AP Photo/Paul Sakuma, File
Myth 4: Credit scores don’t change that often. Credit scores aren’t static. And they won’t necessarily wait a week or a month for your next free-credit-score update before they change. Rather, credit scores have the potential to fluctuate whenever new information is added to your major credit reports, which can happen at any time.
That helps explain why a 2016 VantageScore study found that 79 percent of credit scores changed over a three-month period, with 49 percent rising (19 points on average) and 30 percent falling (24 points on average).
At the end of the day, there are plenty of great reasons to get your credit score in shape for summer.
For instance, credit card rewards are valuable, offering hundreds of dollars in free travel potential. But you need good or excellent credit to qualify. So get to work on improving your score.
(Thinkstock)
