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However, there are some credit scoring myths floating around which can do you only harm.
Myth 1: Closing accounts help in building credit scores
Once credit accounts have been opened, they should not be closed for the purpose of improving credit scores. While calculating credit scores of a person, credit bureaus also take into the consideration the total available credit of that person. When all the accounts are closed, the ratio of total debt to the total available credit increases, that eventually affects the credit score. It is also important to keep older accounts in function. This is because the length of the credit account is also considered while calculating the credit score. For instance, recently opened credit account carries less credibility that a credit account that has been in existence for the past 10 years.
Myth 2: Checking FICO score can affect your credit score
This particular myth does not hold any substance. However, this is the most common statement issued by mortgage brokers to their customers. This is because mortgage brokers get confused about the type of inquiries that can hurt credit score. FICO scores are affected when inquiries are made by lenders for the purpose of verifying a customer’s credit history, when he applies for new line of credit. FICO scores never get hurt when a person orders his own copy of credit score. FICO scores also do not get affected when mass inquiries are made by credit card lenders for the purpose of sending pre-approved credit cards. There is a way to prevent any effect caused due to frequent inquiries. All the inquiries made in a 45-day period are treated as one single enquiry. Borrowers can avail this benefit and complete their mortgage loan shopping within this short period of time.
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