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Biz Bits: New credit score myths
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Tip of the Week
Some credit score myths seem to be fading, such as the mistaken belief that your credit score is beyond your control. In fact, 94 percent of respondents to a 2013 survey by the Consumer Federation of America and VantageScore Solutions, a credit score development company, knew that making on-time loan payments helps improve your credit score.
New myths, however, seem to constantly emerge.
Here are five new credit scoring myths and the truths that debunk them:
Myth No. 1: When applying for a job, a bad credit score can count against you.
The truth: While many employers do consider credit when evaluating job candidates, they are looking at a modified version of credit reports. Not credit scores. What's more, potential employers can't even look at a candidate's credit report unless a candidate gives express permission. And finally, if the employer's decision is adverse to the applicant, in most cases they must provide a copy of the report before taking any adverse action based in whole or in part on the report.
Myth No. 2: Closing a credit account is always good for your credit score.
The truth: While closing an account might make sense for your own personal financial situation, it also might count against your credit score. For example, if you pay off a credit card and choose to close the account, you've reduced your overall debt (which is good) but also reduced your amount of credit available for use (which may not be good for your score). How closing an account impacts your credit score will depend on how much other credit you have available on your other accounts and the general makeup of your personal credit history.
Myth No. 3: Anyone can submit information to the credit bureaus about you.
The truth: Lenders and other organizations such as collection agencies and even some landlords report unpaid debts, payment information and balances to the three national credit reporting companies: Equifax, Experian and TransUnion. By law, only companies that meet responsibilities mandated by the Fair Credit Reporting Act for accuracy may provide data to the three national CRCs. All organizations furnishing credit data to the credit bureaus must respond in the event that there is a dispute.
Myth No. 4: Your social media activity can affect your credit score.
The truth: While it's true that some lenders have begun reviewing social media accounts as a way to market their products and services more effectively, nothing you do on social media is included in your credit reports at the three national CRCs.
Myth No. 5: You only have one credit score.
The truth: You may actually have many ... dozens in fact. Although most people are familiar with the three national CRCs that gather credit information and use it to assign credit scores, there are actually many credit scoring companies. Your score may also vary depending on which CRC's data is used. What's more, different types of financial organizations may use different models to evaluate you. To get a true picture of your credit status, it's best to review your credit reports and credit scores from multiple sources.
Always double-check Facebook friend requests. Take a few moments to look over the profile and verify that account is a real person, not a scam. Scan your list of current Friends to see if any show up twice (the newer account is going to be the scam one). Report fake accounts to Facebook.
Here's five of Forbes' 2014 "30 Under 30" for finance:
1. Lucas Duplan, 22, Clinkle founder
2. Luis Alvarado, 29, Wells Fargo investment research analyst
3. George Bachiashvili, 28, Georgian Co-Investment Fund founder
4. Lucy Baldwin, 29, Goldman Sachs managing director
5. Sam Barnett, 24, SBB Research Group founder
Number to Know
6: To minimize debt and financial penalties resulting from having to pay off unexpected expenses, create an emergency fund. Allocate some of this year's holiday budget, year-end bonus and/or tax return to an interest-earning, FDIC-insured savings account. You can also set up automatic contributions to build your savings. A good rule of thumb is to maintain six months' worth of expenses in your savings, just in case.
Staying organized is critical to any business looking to be productive and profitable. Scanning paper documents to online storage services like Google Drive, Evernote and Dropbox can help reduce clutter and enhance organization, but you'll probably still have hard-copy files you need to keep on hand. Depending on how many files you need to physically store, you might be able to use a simple filing cabinet or bankers' boxes, rather than a complicated professional organizational system.
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