Can You Protect and Improve Your Credit Score?

Your credit score is an important part of your financial life. You can protect your credit record by taking advantage of the opportunity to view your credit reports for free once a year. You can also subscribe to a credit protection or credit watch service; make sure it is reputable and thorough.
Here are some common myths about credit scores and the correct information to help you protect and improve your credit score:

Myth #1: It’s impossible to improve your credit score.
Truth: You can rebuild credit over time with patience and good debt management. As you consistently make prompt payments, lenders will pay less attention to the older negative marks on your credit history.

Myth #2: Checking your credit can hurt your credit score.
Truth: Pulling your own credit report, also known as a “soft inquiry,” doesn’t affect your credit score. In fact, regularly checking your credit report is a responsible financial practice. You are entitled by law to one free report from each of the three reporting bureaus every 12 months. (If a lender pulls your credit report to approve a new line of credit, it is a “hard inquiry” and can lower your credit score. You normally have to authorize this process.)

Myth #3: Closing old accounts can boost your credit score.
Truth: Closing an account lowers your available credit. This can raise your debt-to-credit ratio and lower your score, especially if you carry balances on other cards.

Myth #4: Closing old accounts can shorten your credit history.
Truth: Accounts with no negative marks that are paid in full will remain on your report for 10 years after being closed.

Myth #5: Cosigning for a loan or credit card won’t affect your credit score.
Truth: You are just as responsible if the borrower misses a payment or exceeds his or her limit, and your credit score will be penalized.

Myth #6: Paying cash is the best thing you can do for your credit score.
Truth: A good credit score means a solid credit history, which can’t be built or maintained by paying for everything with cash.

*Information is from State Farm Insurance e-newsletter. Read more at: http://learningcenter.statefarm .com
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