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7 Credit Score Myths That Will Still Surprise You

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Surprise! Consumers are still confused about what goes into a credit report and a credit score. Given how opaque these things were for such a long time, it’s entirely predictable that confusion reigns. It’ll be that way for a while. Credit bureau TransUnion recently released a survey with more proof that the mythology built up around credit reporting will take a long time to undo. Heck — one in four Americans reportedly think the sun revolves around the Earth, so fixing this will take a while.

The myth that I think will be hardest to beat back is the notion that income or assets have anything to do with credit reporting. They don’t, even if they should. You might have $1 million in the bank, or have just landed a huge raise, but you’ll be denied a credit card if your credit score is low or you have a “thin” credit file.

TransUnion found that about half of American adults think a pay raise increases their credit score. And even people with good credit are confused about what goes into that good credit.

Among the findings from TransUnion’s online survey of about 1,000 people:

  1. Payments affecting credit scores: Nearly half of respondents falsely identified rent (45%) and cellphone (47%) payments as directly affecting their score; yet, these aren’t regularly reported to credit bureaus.
  2. Information in credit reports: Among survey respondents who checked their credit report in the past 30 days, half mistakenly believe their full employment history (55%) and income level (41%) are included in their reports.
  3. Consumers with “good” or “excellent” credit were confused: 49% of those with “excellent credit” mistakenly thought rental payments are included in their report.
  4. Pay raises: Nearly half (48%) of respondents who’ve checked their credit report in the past year incorrectly believed an increase in income improves their score.
  5. Credit inquiries: 40% of respondents who’ve never checked their report are unsure how checking it affects their score, and 20% who checked their report in the past year mistakenly believed checking their report would decrease their score.
  6. Paying down debts: 61% of those who checked their report in the past 30 days erroneously believed paying off debts from late payments automatically increases their score.
  7. Trended information: 70% of those who’ve checked their report in the past year incorrectly assumed that it reflected recent changes or trends in their finances over time.

[Editor’s Note: If you want to see where your credit stands, you can get two of your credit scores for free every month on Credit.com, and you can check your free annual credit reports at AnnualCreditReport.com.]

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  • MatthewC

    Wouldn’t an increase in pay change their DTI? That is not on the report itself but when applying for a loan/mortgage/credit card it will have an impact or am I mistaken?

    • http://www.Credit.com/ Gerri Detweiler

      Yes an increase in income can change the debt-to-income ratio but as you point out, that information isn’t on the credit report.

  • GCR

    Ok, but please then elaborate on the answer… you are just showing what people erroneously believe, but not the facts…

    • http://www.Credit.com/ Gerri Detweiler

      We’ve written hundreds of stories on credit scores and myths. Appreciate the feedback. Sometimes one story leads to another.

  • Richard M.

    My credit score has been dropping this last year (810 to 792) because I have been using approximately 30% of my available credit limit. However, I have had credit cards since 1986 and I have never carried a balance to the following month. My revolving credit accounts are paid in full every month. Somehow, this is not taken into consideration by the credit agencies.

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