How Does Credit Work?

Myths about your credit report.

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How Does Credit Work - Myths About Your Credit Report

myths about your credit report
How does credit work?

Learn about the various myths about credit reports and how to build credit to be better financially prepared to stay a stay at home mom.

If you're wondering how does credit work, it's important that you learn more about your credit, how it works, your credit report, and how to build credit.

After all, your credit report and score are extremely important.

Your credit affects so many parts of your life and you may not even realize it.

It affects what you pay for a cell phone, what you pay on insurance, where you are able to live, whether you can get a job, and so much more.

This means that you, being a stay at home mom, definitely needs to figure out the answer to the question how does credit work.

First, when you're wondering how does credit work, you need to understand more about your credit report and the agencies behind these reports.

You'll find that there are three big reporting agencies, including TransUnion, Experian, and Equifax.

While there are laws that they have to follow, these agencies are not controlled by the government and many times there is little reinforcement of the laws that have been made.

Many people have no idea what their credit report is all about and find themselves wondering, how does credit work.


Myths About Your Credit Report

With being a stay at home mom you're asking yourself how does credit work or you simply want to learn how to build credit, you need to understand the truth about your credit report. Many myths are circulating regarding your credit report and it's important that you know the truth behind these myths. Here is a closer look at some of the top myths about credit reports and the information you really need to know so you can find out how to build credit.

Myth #1 - Checking Your Credit Drops Your Score
One of the big myths behind credit reports is that checking your credit drops your score. It's important that you know how does credit work because it will prove this myth totally wrong. Checking your credit report is not going to do any damage to your credit.

While inquiries from lenders or creditors may end up resulting in a problem, soft inquiries when you check your own score is not going to cause any damage to your score or report.

Myth #2 - Bad Debts are Removed From Credit Reports When You Pay
Another common myth that many people encounter is that bad debts are removed from credit reports when you pay. Some people want to learn how to build credit and they think that simply paying a bad debt or a bill they are behind on is going to result in the removal of that entry.

Even when you pay, the negative records can end up being on your credit report for up to 7-10 years. While the accounts will show that they are paid once you pay the bad debt, the mark probably won't be removed.

Myth #3 - Repairing Your Credit is Illegal
With being a stay at home mom, if you're interested in learning how does credit work, you need to know about credit repair. Many people think that repairing credit is actually illegal, but this is not the case.

While some companies promise credit repair and use illegal methods, there are legal ways that you can work to repair your credit. You can have negative items that are out of date removed. Incorrect date can be removed and deals can be made to settle debts with creditors. Of course, keep in mind that credit repair is going to require you to check your report to see what information is accurate and what information should be removed. Then you can work to get the reporting agencies to remove false or out of date items from your report.

Myth #4 - You'll Improve Credit By Closing Old Accounts
Many people have the idea that closing all their old accounts will end up improving their credit. However, this may actually lead to a lower credit score. You need to know how does credit work to realize why this is a myth.

When you cancel accounts, it can make it appear like you have a short credit history. It can also show that you have less available credit, which can lower your score.

Myth #5 - To Get a Free Credit Report You Need to Sign Up for a Service
Today there are many services out there that offer information on how to build credit and advertise that you can sign up with them to get your free credit report and other reporting services. However, you don't have to sign up for any paid service in order to get a free credit report.

You are guaranteed by law the ability to get one free credit report each year from all three credit reporting agencies. Don't allow scam services to trick you into paying for their services when you are entitled to those credit reports for free.

Wondering how does credit work? If so, understanding these myths and the truth behind them can definitely give you a great insight into how credit works as well as how to build credit. Don't allow the myths to affect your views of how credit actually works. Keep this information in mind so they myths can't blind you to the truth you need to know about credit.


Money Saving Resources

Use the following resources to help you on your path towards becoming debt free.

1. More pages on Stay-a-Stay-at-Home-Mom.com:
  • How to Get Out of Debt
  • Financial Freedom: The True American Dream
  • How to Live Debt Free
  • What the Experts Have to Say About Debt
  • Different Types of Debt
  • How Debt Consolidation Works
  • About Payday Loans
  • Consequences of Poor Credit
  • About Bankruptcy
  • 2. Debt Proof Living:
    I found Mary Hunt when I first started to pay off my own debt. Her resources and support were just what I needed at the time, and they might be of benefit to you as well. Check it out: Debt Proof Living



    3. Rayven Recommends these books on Amazon:

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