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42 >> OUR HOUSE Spring 2017 Dominion LenDing CentreS H ow is your credit score calculated? it's a complex answer and because the secret formula has never been revealed, common myths persist. Here, we separate fiction from fact. MytH 1 Having too many credit cards will hurt my credit score. FACt Actually, cancelling healthy, active cards or accounts hurts more since all your payment history is lost, along with the type of credit granted. the average Canadian has 10 credit sources: having more does not hurt as long as you pay on time. Along with paying on time, you should observe the rule of maintaining a balance at no more than 75 per cent of your credit card's limit, but less is best. the more often you InquIry type SoFt InquIry HArd InquIry Who triggers the credit report? You, when you pull your own report Credit card companies marketing pre-approvals You, when submitting loan or credit card applications Approved business people (e.g. landlords, creditors, lenders, employers) Does an inquiry affect my score? nope yup, a little. inquires are included in the calculation done for credit scoring Do more hits on my credit report matter? nope yes. they can indicate someone is facing financial difficulty inquiries not made by you might be signs of identity theft How long the inquiry stays on the report two years two years Who can see it? only you Approved business people, such as current or prospective creditors/lenders 5 things to know about credit report inquiries when you don't pay on time. the other organizations that only report on default are municipalities and vehicle insurance providers. Be sure to pay your traffic tickets and bylaw infractions too. MytH 4 Checking my credit score will decrease it. FACt there are two types of inquiries: soft and hard. A soft inquiry occurs when you pull your own credit report. Credit card companies also pull soft inquiries when marketing pre-approval offers. Soft inquires do not affect your credit score. A hard inquiry is triggered by the applicant when submitting a loan or credit card applica- tions. Hard inquires affect the score slightly. these inquires are included in the calcula- tion done for credit scoring. recording the number of inquires a consumer has on the credit report allows potential lenders to see how often a consumer has applied for new credit. this can be a precursor to someone facing credit difficulty. too many inquiries could mean that a consumer is deeply in debt and is mAking tHe Five common myths about credit scores by Michael hallett apply for new credit the more you'll lower your score. MytH 2 Avoid using credit cards if you want to build credit. FACt making your payments on time builds your credit history strength and score. the credit bureau only receives reports regarding your balances and payments. Just remember to keep your balances low and manageable. MytH 3 I pay my utilities on time every month, so I'm building credit, right? FACt these providers only check your credit to determine creditworthiness: they don't report your payment history to the bureau. on the flip side, though, they do report tooLBoX GRAdE

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