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Investment Advisory Services are offered through Bright Futures Wealth Management and/or Cetera Advisors LLC registered investment advisers.  Securities are offered and sold through Cetera Advisors LLC, - A registered broker dealer. Member FINRA, SIPC. Bright Futures Wealth Management and Cetera Advisors LLC are not associated entities. Cetera is under separate ownership from any other company. Bright Futures Wealth Management is under separate ownership from any other company. Perrotto Private Wealth is under separate ownership.

This site is published for residents of the United States only. Financial Advisors of Cetera Advisors LLC, may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Not all of the products and services referenced on this site may be available in every state and through every advisor listed. For additional information please contact the advisor(s) listed on the site, visit the Cetera Advisors LLC site at www.CeteraAdvisors.com

 

Copyright © 2018 Perrotto Private Wealth Management. All rights reserved

Credit reporting myths and how being misinformed can hurt your credit score

January 2, 2018

 

As with most American’s, we use our credit daily, by using our credit cards to build reward points, having a mortgage on the way to home ownership, to having a small business loan to achieve entrepreneurship. Credit scores are constantly on the top of our minds,

 

but for many, poor financial literacy can hurt you for years. A few months ago Transunion did their annual credit literacy survey, The online survey includes responses from 1,002 U.S. consumers age 18 and older, and the results were shocking. I am going to break down a few of the biggest myths, and see if I can help improve your financial literacy while we are at it.

 

How does closing a credit account effect your credit score? This is a big one. I know one person who has a Dell credit card for 8 years, and pays a crazy annual fee because if he closes it, it will “hurt his credit.” 35% of respondents said closing your credit card hurts your credit score, another 20% have no clue if it does or not. The main two things that will affect your credit score when closing an account is If the card represents a small amount of available credit or has a short credit history, the closing may have minimal or even no impact on a credit score. If your oldest credit card also has the most available credit, this can hurt your credit. If you opened a credit card for a promotion, and close it out after that promotion, most likely it will have a minimal effect on your credit profile.

 

If I check my credit a lot to make sure there isn’t any fraud, won’t that hurt my credit score? A hair under 45% of people think that checking their credit score hurts their credit score. Let’s break down the two types of credit pulls. First is a soft pull, this comes from the consumer, and it does not affect the credit score, the second is what we call a hard pull, and this is for when you are applying for credit, and this does affect the credit report. Most reporting companies want to see only 2 or less hard pulls in a two-year period. But for soft pulls, you should be checking weekly. It is crucial to check your credit to make sure no fraud or identity theft has happened. AT best consumers should use a company like ID Shield (insert my link) to proactively watch over their full credit profile for fraud.

 

If I activate a credit freeze or credit lock will it prevent lenders from accessing my credit report? There are three major U.S. credit reporting agencies in America. They are Transunion, Equifax, and Experian, and each has a credit report for every consumer who applied for any type of credit in the country. Many experts as well as the agencies themselves encourage consumers to freeze their credit when not in use, to protect themselves against fraud. When asked, almost half of all respondents said they believe it’s possible to protect all of their credit reports at once, even though there is no tool to actually do this.

 

Included below is how to actually freeze your credit with the different agencies.

Equifax — 1-800-349-9960

Experian — 1‑888‑397‑3742

Trans Union — 1-888-909-8872

 

You'll need to supply your name, address, date of birth, Social Security number and other personal information. Fees vary based on where you live, but commonly range from $5 to $10.

 

Does being married affect my credit score? Almost 45% of consumers think marital status is on a credit report. Even more telling, more than half of consumers ages 55 and up believe marital status is factored into credit reports. No, marital status does not appear on a credit report, but what does show on a married couples credit is joint purchases like a house or car. Also what happens is that both spouses add each other as authorized users to each other’s accounts, but you do not need to be a spouse to do any of these things. A parent can cosign for a child. A business partner can cosign for another. Couples shopping together should keep in mind that the individual with the lower credit score can dictate lending terms or even loan approval rate, if they are applying jointly, most of the time, the person with the lower credit score is who the bank/loan company will use, so it’s incredibly important that both spouses monitor each other’s credit worthiness.

 

If my credit is low, does it stop me from traveling internationally? Almost one third of adults surveyed thought having a low credit score dictates if they are allowed to leave the country. This is large myth. Having a good credit score allows you to have credit cards that offer certain perks such as travel insurance, and car rental insurance, and no foreign transaction fees, but credit in no way dictates your ability to travel from one country to another.

 

If I am late on my utility bill, will that be reported on my credit report? Half of all respondents said that late utility bills are reported on their credit reports. This is a tricky one. Some utility companies report on time payments as well as late payments, some only report if you are late, and most report if you slip into collections. Remember credit is the ability to pay one’s financial obligations, and is the cornerstone of our society, which is why it’s so crucial to ensure the payment of all accounts on time and if possible, in full amount each month. Even small utility bills, if not paid, can damage a credit score.

 

So as you can see, there are many misconceptions about credit reporting, credit scoring, and what your credit report actually gets used for. I hope I cleared some of this up for you. If you have any questions at all, please don’t hesitate to give me call at 718-551-7131 or shoot me an email at dperrotto@ceteraadvisors.com

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