Real estate news: Credit report myths

There is a lot of misinformation out there when it comes to building and maintaining a good credit score in order for you to purchase your dream Boston condos, so it’s important to be mindful of the following credit-building myths.

1. To build credit, you need to use your credit cards

Many insist that the only way to establish good credit is to use it. While it’s true that utilizing some level of credit is important, more is definitely not better. Carrying a high balance on your credit card has the potential to hurt your score. And on top of that, you will end up paying more each month, due to the recent rise in interest rates.

Credit utilization, or the amount of credit you’re using, makes up 30% of your FICO score. The higher your credit card balance, the higher your utilization rate, which hurts your credit score. That said, keeping a modest credit card balance can help, A good rule is to use only 30% to 40% of your maximum credit line.

2. Close your credit cards once you pay them off

Closing a credit card once you’ve paid it off may seem like a logical thing to do—that way, no more debt. Yet in reality, closing cards is a bad idea and we advise you to steer clear of these credit-building myths.

“Closing recently paid off accounts can shorten your credit history, especially if it’s one of your oldest accounts to date. Credit history, or how long you’ve had credit accounts, makes up about 15% of your credit score. This is important when buying a Boston condo for sale.

3. Occasional late or missed payments are no big deal

Late or missing bill payments happen to just about everyone, and therefore may seem like no big deal. However, paying your bills on time has a huge effect on your credit, making up 35% of your FICO score. It doesn’t matter how much credit you have, as long as you can afford to pay them in full and on time. This is important to remember Boston condo buyers

4. You can boost your credit score by adding your spouse to your accounts

If your spouse has excellent credit— but yours is subpar—you may have heard that adding your upstanding partner to your own credit accounts will help raise your own score. It’s not necessarily that simple. Credit scores are unique to each individual, so merging accounts won’t necessarily raise your credit score. However, there is one way a high-scoring partner does work in your favor.

When it comes to applying for new credit with your partner, such as filling out a joint application for a mortgage, each partner’s credit score is taken into consideration by the lenders. Lenders will often use an average of a couple’s scores to determine overall creditworthiness as a team when you’re buying a Boston condo for sale. So in this sense, your partner could help you get a loan with good terms.

5. Getting a credit report lowers your score when buying a condo

Checking your credit yourself through an official report from one of the primary reporting agencies is a soft inquiry, which won’t affect your credit score. However, loan applications for new credit cards or mortgages are considered hard inquiries and will stay on the report for up to two years, briefly lowering your score.

Buying a Boston condo for sale

There are many credit-building myths out there and these are just a few. Consider speaking with a professional about how to best build your credit to purchase the home of your dreams.

How to improve your credit score

Updated: Boston Real Estate Blog 2022

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Many people looking to buy a Boston home will need to know their credit score and “how accurate is Credit Karma?” is one of the more common questions we receive.

Below we will give you an in-depth overview of what Credit Karma is, how accurate Credit Karma is, and how often Credit Karma updates.

Let’s dive in so we can understand how accurate Credit Karma is:

What is Credit Karma?

Credit Karma is a free credit monitoring service. Credit Karma allows consumers to track their credit scores, learn about credit, and sign up for credit alerts.

Credit Karma makes money by selling advertising and allowing consumers to use its free service. Credit Karma does a great job of helping consumers learn about what impacts their credit scores as well. What helps keep Credit Karma a free service is countless advertisements that consumers can sign up for. So how accurate can a free credit monitoring service like Credit Karma really be? Let’s take a look under the hood.

How Accurate is Credit Karma?

Credit Karma scores are directly reported by two of the three credit agencies and are as accurate as someone can expect from a free credit monitoring service. More often than not, the accuracy of credit karma scores is in the right wheelhouse. The scores are not perfect and sometimes they can truly be way off so don’t rely on Credit Karma. Instead, if you’re buying a home or vehicle allow your credit report to be run by your financier and see for yourself where you stand. Some of the credit agencies will give you a free report as well.

While Credit Karmas scores may not be totally accurate they do allow one to track their progress and any changes to one’s credit. This is the best use case for Credit Karma, to track which way your scores are moving and to get alerts on things that may be happening with your credit score. Credit Karma has saved a number of people from identity theft.

Credit Karma is accurate enough that they can keep consumers coming back. As the company has continued to grow the scores have become more and more trustworthy.

So is Credit Karma going to give you an accurate credit score? They should be pretty close. Here’s the reason:

“The scores and credit report information on Credit Karma comes from TransUnion and Equifax, two of the three major credit bureaus. We provide VantageScore credit scores independently from both credit bureaus. Credit Karma chose VantageScore because it’s a collaboration among all three major credit bureaus and is a transparent scoring model, which can help consumers better understand changes to their credit score” reports Bethy Hardeman of Credit Karma.

When you apply for a loan you may find the credit numbers are different from what Credit Karma reports – the scores should be somewhat close!

Credit Karma Vs. Actual Score

After asking ‘how accurate is credit karma?’ the next question is always, how does Credit Karma compare to my actual score of FICO Score? One of the best things about the Credit Karma service is that it generates the credit report straight from two of the top credit reporting agencies TransUnion and Equifax. Credit Karma and your actual score reported from TransUnion and Equifax will be very close, the number of points off won’t be much. Experian is the one credit Agency that does not report to Credit Karma and this is where your score’s largest inaccuracy will come from as it relates to your actual score or FICO score.

How many Points is Credit Karma Off?

Many people ask ‘how many points is credit karma off?’ and the answer varies for each individual case. Credit Karma receives information from two of the top three credit reporting agencies. This indicates that Credit Karma is likely off by the number of points as the lack of information they have from Experian, the third provider that does not report to Credit Karma. If you can figure out your Experian credit score you will be able to generate an accurate detailing of how many points Credit Karma is off as it relates to your actual score.

Before you start your home search for a Boston condo, here are eleven credit report myths you should be aware of:

Paying my debts will make my credit report instantly pristine
Credit counseling always destroys my credit score
Canceling credit cards boosts my score
Too many inquiries hurt my score
Checking my own credit report harms my standing
FICO scores are locked in for six months
I don’t need to check my credit report if I pay my bills on time
All credit reports are the same
A divorce decree automatically severs joint accounts
Bad news comes off in seven years
I can always pay someone to fix or repair my credit

Read more.

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