1. Paying Bills on Time Will Improve My Score

Paying your bills on time will always help you but it will not necessarily increase your credit score. Your scores are evaluated by several factors including good payment history but there is also another important factor AMOUNTS OWED. The more debt you carry and/or the closer you are to your credit limit the more it impacts your scores in a negative way. So remember just making the minimum payment on your credit cards is not the right way to get out of debt or to increase your score.  Personally I recommend maintaining a 30% balance on credit cards or preferably a 0 balance.

2. Carrying a Balance Is Good

I'm quite sure the credit card industry started that "rumor". Credit card companies make their money with the interest rates they charge their customers every month and with all the other fees they usually charge. If you want to be smart with your money you need to beat the system by using their money to satisfy debts you owe immediately without acquiring more debt that you can handle.  I also recommended always paying off your debts every month.

3. If I close my credit cards will my scores increase?

“NO” closing your credit cards will decrease your credit scores dramatically, especially if they have a very long history. The reason being is you will close all of the positive payment history you have acquired.  If you are tired and looking to get out of debt, the best way to do so is once you've paid your credit card debt continue to use your credit card at least once every six months to avoid having them closed by the credit card company.

4. Can HR check my credit for a job?

Even though many treat them interchangeably, credit reports and credit scores are two completely different things. Employers in most states can look up your credit report as part of a pre-employment screening (and during your term of employment), however they do not have access to your credit scores.

5. Who can see my credit scores?

Any lender, insurance company, landlord, or utility provider can buy your score from one of the three accredited credit report agencies. They will use the scores to determine how good of a client you will be for them and how much risk they are taking by doing business with you.  They then will use it to approve or deny you credit, we call it buying power.

6. Foreclosures and Bankruptcies Stain Your Score for 7 Years

This one is partly true.  Whether you are facing a short sale, a foreclosure or bankruptcy you will have that black mark on your credit report for at least seven years (10 years for a bankruptcy). However your credit score will eventually increase as the item gets older (usually after 2 years).  You could also look for a reputable company like www.finivcredit.com to help you regain that buying power and get out of bad credit.

7. How long does a collection stay on my credit report?

A collector has up to 7 years to claim their assets as they can sell your account up to 3 times, which means they will probably do so to keep staining your report and hold you from recovering good credit.  Unfortunately a collection with an open balance could stay up to 21 years on your credit report.

8.  Is it true that after 7 years all my collections and bad debts will disappear from my report?

No it’s not true unless every single collection or bad debt has been paid off completely and has a balance of 0 then it will be removed off your report after 7 years.  ATTENTION the 7 years will not start counting until the day the account has been reported as a paid account and balance 0 so you be the judge. In most cases it hurts  less to keep the account intact.

9.  Why do I need credit?

This question has come up several times after clients have gone through a very famous program that teaches you to close all of your debts and avoid any type of credit.  I am completely against these types of programs due to the fact that you can have credit and be responsible and be able to do more in life than living a life using only cash.  Credit was created to be used as a security blanket.  The answer I give to my clients is that in order to have credit you need to have open lines of credit which doesn't necessarily mean you will have bad credit.  There is a difference between using credit wisely and abusing it.  The wise thing to do is to have a line of credit and spend what you can afford as opposed to acquiring debt you cannot afford to pay off.

10. How many times can I apply for credit and how often?

You should only apply for the necessary credit meaning you should not have more than 2 inquiries a year if you want to maintain a good history, remember inquiries are also a factor for a lender to determine how much you need the loan or line of credit.  You can be denied credit by having too many inquiries since this is a sign of struggle.