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Credit Myths Debunked

Global risk and information solutions provider TransUnion recently released its third annual credit literacy survey, revealing U.S. consumers are misinformed about many fundamental aspects of credit.

The 2017 Myths vs. Facts Survey released on Monday, July 17 showed that many are not educated on credit scoring, reporting and building and lack basic information about the factors that affect a credit score.

“Making credit education accessible for all consumers is one of our top priorities,” said Heather Battison, vice president of TransUnion. “In general, Americans should invest more time and energy into managing their credit. I can’t overstate the importance of good credit.

“There are so many stories out there of people who have struggled to make ends meet because they made mistakes that damaged their credit early in life,” Battison said. “Our goal is to prevent that by eliminating credit confusion through ongoing education.”

With the average VantageScore hovering at 645 in the United States, according to data from TransUnion’s proprietary consumer credit database, the findings of the survey underscore the importance of credit literacy.

Myth #1: Closing a credit account is bad for your credit score.

The report found that more than one-third, or 35 percent, of consumers believe closing a credit card account decreases a credit score, and another 20 percent say they have no idea what effect it would have.

“The truth is, the impact of closing a credit card account varies based on the percentage of available credit the card provides and the length of credit history associated with the account,” TransUnion said in a statement. “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.

“However, if the card in question has a consumer’s longest credit history, or if it represents a large portion of their available credit, it may have a negative impact,” the organization said. “Consumers should weigh all of those factors before closing a credit card account.”

Myth #2: Activating a credit freeze or credit lock will prevent lenders from accessing your credit report from all three credit report agencies at once.

“There are three major U.S. credit reporting bureaus and each has a credit report for all credit-active consumers in the country,” TransUnion said. “A lot of experts encourage consumers to freeze or lock their credit reports when they are not using them to help protect against fraudulent activity.”

When asked, nearly half or 48 percent of respondents said they believe it’s possible to protect all of their credit reports at once, but the fact is that there is no one tool that protects all three credit reports at once.

In June, however, TransUnion and Equifax announced Multi-Bureau Lock, the first-ever joint credit protection offering, which allows customers to lock or unlock both their TransUnion and Equifax credit reports simultaneously to protect from fraudulent activity and identity theft.

Myth #3: Credit reports include marital status.

“Close to half of all consumers still don’t know this basic fact — marital status isn’t on a credit report,” the organization said. “Consumers ages 55 and up were the most likely to get this wrong, with more than half believing marital status is factored into credit reports.

“While marital status does not appear on a credit report, credit still plays an important role in couples’ lives, particularly if they want to finance joint purchases like a house or car,” TransUnion said.

Myth #4: Credit scores affect your ability to travel internationally.

Thirty-one percent are still confused about whether traveling internationally affects your credit score. TransUnion said it does not.

Myth #5: Checking your own credit is bad for your credit score.

Forty-three percent of consumers think checking your own credit score has the same effect as when a lender checks it.

“In reality, there’s a big difference between the two types of credit checks,” TransUnion said. “Soft inquiries — when a consumer checks his or her own credit — doesn’t impact their credit score. In fact, regular credit monitoring is crucial for credit health and helps ensure information is accurate and up to date. It’s the hard inquiries — when a lender checks a consumer’s score to determine credit approval — that impact scores, and can stay on a person’s credit report for up to two years.”

Myth #6: Late payments such as utility bills are always included in credit scores.

TransUnion claims that utility bills are tricky because not all are reported to credit reporting agencies, so the impact on credit scores varies.

For example, some utility companies report both on-time and late payments, whereas others only report late payments or ones that have gone to collections.

“Timely repayment of financial obligations is one of the cornerstones of credit health, which is why it’s so crucial to ensure the payment of all outstanding charges on time and in the full amount each month,” TransUnion said. “Even small utility bills, if not paid, can damage a credit score.”

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Sarafina Wright –Washington Informer Staff Writer

Sarafina Wright is a staff writer at the Washington Informer where she covers business, community events, education, health and politics. She also serves as the editor-in-chief of the WI Bridge, the Informer’s millennial publication. A native of Charlotte, North Carolina, she attended Howard University, receiving a Bachelor of Arts in Journalism. A proud southern girl, her lineage can be traced to the Gullah people inhabiting the low-country of South Carolina. The history of the Gullah people and the Geechee Dialect can be found on the top floor of the National Museum of African American History and Culture. In her spare time she enjoys watching either college football or the Food Channel and experimenting with make-up. When she’s not writing professionally she can be found blogging at www.sarafinasaid.com. E-mail: Swright@washingtoninformer.com Social Media Handles: Twitter: @dreamersexpress, Instagram: @Sarafinasaid, Snapchat: @Sarafinasaid

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