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Understanding Your Credit Score And Credit Score Myths

The foreclosure crisis, the worst recession since the Great Depression and high unemployment has many Ohioans concerned about their credit status. Most Americans understand that the availability of credit and favorable interest rates is affected by an individual's credit score. However, many people adhere to common myths regarding credit.

Cincinnati credit restoration attorneys are aware that incorrect or inaccurate information posted in an individual's credit report can have adverse effects on the availability of credit and favorable interest rates. Sheryl Harris recently wrote a column in the Plain Dealer that is helpful in understanding your credit score.

One of the common myths of credit reporting is that the credit report contains a constantly updated credit score. The truth of the matter is no credit score exists until you apply for credit. Upon applying for a loan or insurance, a credit score is generated based upon the information contained in the credit report.

Therefore it is important to make sure that your credit report has only accurate and current information. Creditors are bound by law to provide accurate information to the credit bureaus. But erroneous or outdated information does creep in to credit reports all across the country.

Many married couples believe they have a joint credit report. Not true. Although couples may have joint credit accounts, the credit reports are individualized. A joint account will show up separately on each individual's credit report.

Often people will close credit card accounts in the hopes it will reduce available credit and raise their credit score. Depending upon the individual situation, closing an account may actually raise a credit score. Part of the credit score formula relies on the ratio of debt an individual is carrying in relation to the combined credit card limits. In some situations closing an unused account may adversely affect your debt ratio.

It is important to remember not all credit report inquiries have an affect on your credit score. When an individual checks their credit report to determine its accuracy, it is considered a "soft inquiry" that does not affect the score. Applying for numerous new accounts or loans can have an adverse effect as applications for credit or insurance are considered "hard inquiries."

A common myth that seems counter intuitive is that bad credit or having a bankruptcy on your credit report dooms your credit score indefinitely.

Any individual who has concerns over their credit or debt situation can find answers through consulting with an experienced credit restoration and bankruptcy attorney in Ohio.

Source: Plain Dealer, "Myths about credit reports and credit score can cost you money: Hidden Truths," Sheryl Harris 29 Dec 2010

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