What You May Not Know About Your Credit

By Mike Wayman

Many people do not understand how their credit score works or how it affects their ability to borrow money, finance large purchases, even obtain auto insurance.

For instance, having no credit at all is not better than having bad credit. It is recommended that even if an individual has no need for a credit card or charge account that they obtain one and use it occasionally. This establishes a pattern of purchasing and repaying on credit without late payments or over-charges. This practice actually improves your credit score, even if you had the cash in your pocket to cover the purchase you made with a charge card. Likewise, it is best to keep an account open, even if you choose to use it infrequently. If a charge account incurs a high annual fee, you must decide if it is worth the cost of maintaining the account.

It is also a myth that only people who have your express permission can view your credit report. Actually, anyone who knows your social security number can access your credit report, including potential employers. Frequent inquiries into your credit report, such as when shopping for lenders for a home or auto loan, also do not hurt your credit score as some mistakenly believe, nor does employing the services of a credit-counseling agency to help manage and pay off existing debt. Knowing these things can help you to manage your credit wisely and succeed in maintaining financial stability.