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Dismantling the Myths Around Your Credit Score

by Samuel N. Asare


Great credit! Those who have it desire to keep it; millions of others are desperately seeking to improve their credit scores. But sorting through the crowded and sometimes misleading viewpoints on achieving and/or maintaining a great score could be a full time job.

Let’s first set the record straight on credit inquiries. Requesting your own credit score, also known as a “soft” inquiry, will not affect your score in any way. On the other hand, excessive “hard” inquiries by third parties, such as banks, mortgage lenders, and credit card companies, do affect your score.

Credit Cards

While we’re not suggesting that loading up on credit cards is a sound idea, cutting up your credit cards and closing out all your accounts will not necessarily improve your credit score. The best way to achieve a great score is to have a good mix of forms of credit and a good payment history. The length of time you have had credit is an important aspect of your credit score, so closing accounts may affect it negatively. Remember that no credit is just as bad as poor credit.

Contrary to popular belief, you don’t have to carry balances on your credit cards to achieve a good credit score. If at all possible, pay off your balances each month to avoid paying unnecessary interest and also boost your score by lowering your utilization rate (your debt as a percentage of your credit limit). A small balance will not hurt your credit, however. Since inactivity does negatively impact your score, we advise using credit cards at least once a month and paying them off.

Adding another person to your credit card account as an authorized user will give that person the history associated with your account and consequently, boost his or her credit – provided, of course, that your credit is good. This may be a good strategy for those with young adult children who need a head start on building their credit. Please note that they do not have to carry a hard copy of the card, unless you want them to have the ability to swipe it.

Cosigning Loans

Before you cosign on any loan, first ask yourself whether you are willing to take over the payments should the other party default. If you are not, do NOT sign! The whole point of becoming a cosigner is that you are responsible for the entire debt if the other party defaults.

Credit Counseling

We are not necessarily opposed to consumer credit counseling, but we urge you to be extremely careful, as numerous instances have occurred where, due to certain errors, consumers ended up with a much worse credit rating after using one of these services. During the process, creditors stop communicating with customers and instead deal directly with the counseling agencies. However, when glitches in the counseling company’s system lead, for instance, to late payments or failure to pay – yes, they do occur! – you may not become aware of the situation until it’s too late. All it takes for such a thing to happen is a simple oversight by someone.

Collection Accounts

Duplicate collection account reporting is one of the most common errors that negatively impacts credit scores. This happens when a debt is transferred and/or sold between collection agencies – which happens quite often – yet each institution records the same account as “active.” The credit scoring model then treats each entry as a separate collection account, with subsequent negative connotations.

Paying off a collection account will initially hurt your score. However, mortgage loan underwriters generally require prospective borrowers to pay off collection accounts. If your score already qualifies you for your desired loan, we recommend paying your collection(s) at the closing table to prevent lowering your score and possibly having to wait for it to improve.

To get your financial questions answered, please call 877.656.9111 or visit

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This website is for informational purposes only. All opinions expressed are solely those of Laser Financial Group, LC., and our editorial staff. The information is not to be construed as any form of professional advice, nor as solicitation for the purchase or sale of any security, whatsoever. No particular outcome is guaranteed. No strategy can guarantee a profit, protect against loses, or ensure peace of mind. Recommendations are based solely on third party insurance products for which we receive compensation. Laser Financial Group, LC, does not provide investment advisory services. This does not constitute an offer to provide services in any jurisdiction in which such offer or solicitation would be unlawful under the laws of such jurisdiction. Any United States tax reference on this website is not intended to be used, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code, or promoting or recommending to another party anything addressed herein.

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