5 Common Questions Credit Reports

It’s a common fact that credit scores are crucial for both borrowers and lenders. With a good credit score you can borrow greater amounts and end up paying less.

With a mortgage, for example, a borrower who has solid credit would expect to pay the best available rate where as someone with a poor credit score could end up paying an additional 1.5% or even more.

That might not sound like a big deal, but on a $300,000 mortgage you would incur an additional annual cost of $4,500 on that extra 1.5%.

There are some basic questions about how to get good credit that come up again and again. Here are the 5 most frequently asked questions.


1. Do You Need a High Income to Get a Good Credit Score?

The simple answer is No! Credit reports do not show your income at all. The main factor with credit isn’t how much you earn, but whether you actually honor your repayment obligations. Someone making $55,000 a year could easily have a better credit rating than a person who is making $220,000 annually.


2. Is it Possible to Use a Federal Employer Number Instead of My Social Security Number In Order to Get a Better Credit Score?

Definitely Not. Using your employers ID instead of your own social security number could be an illegal crime known as "credit substitution." Plus, no lender will accept an employer ID number anyway. Don’t ever do this.


3. Is it An Advantage to Have Lots of Credit Cards Rather Than Just One?

 If you reduce the number of cards you have by combining accounts and debts, you might actually get a lower score. However, you have to watch credit limits.

The general ideas is that the more of your available credit that you use the lower your score. For instance, imagine that you have five credit cards with different limits and in each case you have used 50% of the amount available to you. You then combine all cards into one card with a big balance but now you're using a far-higher percentage of your available credit line, say 90%.  

You should also consider that while it makes sense to pay down credit card debts, it may not make sense to close accounts. The reason has to do with credit card history. The general rule is that the longer your history, the higher your score.


4. My Mortgage Payment is Due on The 1st However I'm Allowed to Pay it Up Until the 15th Without Penalty. If I Pay My Mortgage on the 14th Will it Show Up On My Credit Report?

 Usually no, it won’t however you have be careful here. Some unscrupulous lenders charge excessive fees and may even raise interest rates if payments are even a day late.

Most mortgage lenders typically provide a grace period because checks may be delayed in the mail and the payment day might fall on a weekend or holiday. However, it's absolutely best to pay  it on time if possible.


5. How Often Should I Check My Credit Score?

 It makes sense to check your credit report regularly. You can get three free credit reports per year, one from each of the major credit reporting agencies, without charge, by going to ProfinityCreditReport.com.

Additionally you're entitled to a free report if a company takes adverse action against you such as denying your application for credit. You're also entitled to one free report per year if you're unemployed and looking for a job