Credit Myths

1. Ordering your credit report will lower your credit score. Absolutely false. You have the right to one free credit report annually. Ordering a copy of your consumer report has no affect on your credit. To order your free report, visit: annualcreditreport.com.

2. Closing a credit account will raise your credit score. False. Closing a credit report can actually lower your credit score. Let's say you have a High Credit of $10,000 and a Debt/Credit Ratio of 30%, meaning you have debts of $3000.00 and you decide to close one of your accounts with a credit limit of $2000. You have effectively raised your Debt/Credit Ratio by 7.5%. This will lower your FICO score which is based in part on having a Debt/Credit Ratio of less than 35%. Even is you never use a credit card again, your High Credit remains on the credit file. As you pay down the debt, you decrease the Debt/Credit Ratio and you look more credit worthy to credit grantors.

3. Paying off a negative credit account will remove it from your credit report. False. If you negotiate with a credit regarding a negative account to pay it off, ask them to delete the file as part of the agreement. If they refuse, ask the creditor to give you a "delete" letter. This works the same as if the creditor deleted the file, except you have to submit it to the credit bureaus yourself. Get the delete letter, make copies and send a copy to each of the credit bureaus.

4. Cosigners are not responsible for the account. False. If you cosign for credit for a friend or relative, you've just made yourself liable for the debt if your family member or friend fails to pay. After all, the only reason they got credit is because of your good credit. My suggestion...NEVER CO-SIGN!!!

5. Becoming an authorized user will raise my credit score. False. Not any more. At one time, becoming an authorized user would raise your credit score, by transferring the card owners good credit to you, if you had bad credit. In 2007, FICO initiated a program to no longer recognized authorized users on accounts that do not belong to them. In fact, if you're an authorized user, your FICO might even drop.

Final Thoughts

Credit worthiness has become increasingly important. Credit impacts every area of our lives from acquiring a mortgage, to getting an automobile loan, credit cards, insurance and even employment. Guard your credit at all costs. Check your credit report every 6 months, checking for Identity Theft and Fraud. It's free. Don't cosign for anyone. Your good name is too important. Maintain the proper Debt/Credit Ratio and pay down debt, but don't close accounts unless you know for sure that it's not going to lower your credit scores. Learn the rules about how to Fix Bad Credit.