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Bankruptcy Canada’s Licensed Insolvency Trustee (LIT) wrote this article to dispel many common credit score myths that a Trustee most commonly hears.
Myth #1 – More money earned means higher credit scores.
False! Your income has nothing to do with your credit score or credit report. Your credit score is solely a measure of your ability to pay your bills on time.
Myth#2 – Once you’ve settled a debt It drops off your credit report.
False! Information on your credit report stays on your credit report for up to seven years.
Myth #3 – Credit bureaus are accurate all the time.
False! Most credit reports contain errors.
It is essential that you check your credit report often and advise the credit bureau of any errors.
Myth #4 – Cash only policies will help your credit score,
False! Your credit score is solely a measure of your ability to pay your bills on time.
So, In order to have good credit you have to use credit, and use it responsibly.
Myth #5 – Closing your credit card accounts improves your credit score.
False! When you close a credit card account it may affect your credit utilization. Credit utilization is total credit available divided into your debt.
For example, If the total credit you have available is $10,000 and you are carrying debt of $3,000 your utilization rate is 30% ($3,000 divided by $10,000).
It is recommended that you keep your utilization below 30 percent.
Myth #6 – Pulling or looking at your credit report will lower your credit score.
False! Checking your own credit score does not affect your credit score.
Myth #7 – Disputing accurate information on your credit report will remove it.
False! The credit bureaus will remove inaccurate information but they will not remove accurate information.
Myth # 8 – A bankruptcy will give you a bad credit rating for 7 years; until the fact of the bankruptcy drops off the list.
False! If you are diligent about rebuilding your credit rating by:
- Correcting errors on your credit report;
- Getting a secured credit card, after you are discharged, and always paying the balance on time;
- Getting additional credit after a few more months, such as a car loan or an RRSP loan and always, always paying your bills on time.
You can rebuild your credit in about two years so you will be able to get credit at the best rates available to people with good credit, who have never been bankrupt.
Contact a government licensed bankruptcy trustee today at 1-877-879-4770 toll free or contact us online.