Common Misconceptions About Credit

Posted by on Thursday, December 4th, 2008 at 11:26am.

With an abundance of metro Atlanta homes for sale you could assume that getting approved for a mortgage would be easy; however, many would-be homeowners have been denied home loans, partly because of credit problems. Banks are now in the situation where they need to be more selective when it comes to approving home loans, which means that unless your credit is excellent, the chances of obtaining a mortgage at an attractive interest rate are greatly reduced.

Unfortunately, misconceptions about our credit and our credit rating, also called our FICO score, have kept many of us from achieving the dream of owning an Atlanta home. Some common credit misconceptions include:

My utility bills don’t affect my credit rating.

FALSE. Your utility bills not only affect your credit rating, but may play a bigger part in your FICO score than you might think. Your utility bills are often a clear indicator of how responsible you are regarding paying your bills on time.  Consider making your utility bills a priority every month by paying them on time and paying them in full.

My student loans don’t affect my credit rating.

FALSE. Many studies show that delinquent student loans are the number one reason people have low FICO scores. Don’t forget about your responsibilities regarding the repayment of your student loans. If you are currently delinquent on your student loans, call the loan company and discuss what you need to do to make your loans current. And, most importantly, continue to make payments in full and on time.

I should close most of my credit accounts to raise my FICO score.

FALSE. Closing your lines of credit lowers your FICO score because part of your score is determined based on the amount of available credit you have at any given time. Avoid maxing out credit cards and don’t close unused accounts, unless absolutely necessary, and your credit rating will thank you.

I have a lot of credit, but I always pay my bills on time. My FICO score must be excellent.

FALSE. Although your ability to pay your bills on time does not go unnoticed, spending up to your credit limit and having several maxed charge cards lowers your available credit, which then lowers your FICO score. Concentrate on paying down your current credit cards and don’t open any new cards.

Considering buying or selling? Contact Tina Fountain Realtors to speak to a professional real estate agent, we can be reached at 404.842.1555.

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