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5 Misconceptions About Credit Scores

5 Misconceptions About Credit Scores

Credit reports and scores have become an essential part of our daily lives since the 1980s when banks implemented a system to calculate consumers’ creditworthiness. Today, it is crucial to thoroughly understand your credit valuation as a borrower. However, most consumers have very limited knowledge about what improves and hurts their credit score. As a result, their ratings remain low as they struggle to make payments on balances with high interest rates. Below we have put together the top five misconceptions about credit scores.

1. There is only one credit score.

Contrary to this belief, there are several models to calculate credit ratings. FICO is the name of the most popular model used by many lenders. The score range is from 300 to 850. The higher the number, the better is your standing as a borrower. Before applying for credit, you can request your score from one of the companies. It will give you an idea what lenders will see when they pull your credit information. Keep in mind that scores from different companies may vary by several points.

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2. Checking your credit hurts your score.

The answer to this is both yes and no. Nowadays, not only lenders may request your credit report, but insurance companies, landlords, potential employers may also look at your credit ratings to make financial decisions. However, unless you apply for a loan, most companies do a “soft inquiry” that does not affect your score. Your own requests are also considered a “soft” pull and will not hurt it. When reviewing a credit application, a loan officer makes a “hard inquiry” that will lower your score by a few points. Think twice about applying for new credit if your credit score[1] is low. It is unlikely that a lender will approve your request, and you will lose your credit points.

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3. Closing credit accounts will improve my score.

This is one of the biggest misconceptions that consumers have.[2] Actually, closing your credit cards will have the opposite effect and will lower your score. Why? Because it decreases the amount of credit available to you in relation to the balances you owe. The higher this ratio is, the lower your rating will be. Even if you do not use your credit cards, the account history remains on your report. Together, good payment record and the length of time accounts have been opened contribute to a large percentage of your credit score. Leaving those accounts open improves your rating over a period of time.

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4. It takes a long time to bring the credit score up.

So, credit rating plunged after a few missed or late payments. How can you bring it back up? Closing accounts with negative marks will not boost your score. Creditors can still view the information on closed accounts and can determine whether you can manage your debt well enough. However, there are ways to improve your creditworthiness. Scores update every 30 days and reflect your activity during that time frame. If you make payments on time and do not use any new credit, your number has a potential to increase by as much as 20 points in just three months.

5. Paying off collection accounts will not improve my credit score.

This is a very common misconception that does not have a definite yes or no response. It is important to understand that a credit report is a history of how you have managed your credit over a period of time. As you clean up collection accounts, make on-time payments, lower or pay off balances, the adverse records will no longer dominate in your credit file. As a result, your score and your creditworthiness will eventually improve. Keep in mind that collection accounts and other negative marks such as debt settlement, foreclosure, and bankruptcy, remain on the report for seven to ten years. As long as these marks are valid, they cannot be deleted. In some situations, credit repair specialists can assist in removing derogatory records from credit reports. If you find a collection account that has been paid off a long time ago or a delinquent account that does not belong to you, contact a credit repair company for assistance.

Featured photo credit: Acorns.com via 1y986jl0sf53nmdkrzen9mln-wpengine.netdna-ssl.com

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Last Updated on June 1, 2020

10 Reasons Why Following Your Passion Is More Important Than Money

10 Reasons Why Following Your Passion Is More Important Than Money

Elite Daily have got some great points as to why you should chase down your dream job, regardless of how much the wage is. If you’re feeling unfulfilled in your career, maybe it’s because you’re on a path that doesn’t connect with your passion? Maybe it’s time to steer right off that road and take a different route:

Money is a very powerful thing, it builds empires and breaks down kingdoms, it allows for dreams to come true and it takes others away, it makes some people happy and others completely miserable. Today the pursuit of money is almost directly linked to the pursuit of happiness, many will argue that money = happiness.

However, this is inherently problematic as this mindset leads many people to stray down a path that doesn’t best suit them. When people choose their careers, they are sometimes blinded by money and so choose to follow the paper trail. Although money is great and can buy us all the things that will temporarily make us happy, no amount of money can buy time. Time is our most valuable asset and it is something, that while on this earth, we should spend most wisely. You shouldn’t feel like you’re mindlessly wasting your life away

This generation is particularly in trouble because jobs are scarce and many of us will be stuck doing jobs we hate just because we need money. Although this may be the right move for our careers now, this shouldn’t be something we do for the rest of our lives. it is best we search for something we are passionate about. Here are the 10 reasons why you should follow your passion and not the money.

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1. Working for money may seem like good enough motivation for one to keep at their career.

Every morning Monday through Friday you go to work 9 to 5 sitting their punching away the hours stressing about the work at hand. This is not a way to enjoy your life. Working for 8 hours a day 5 times a week at something that makes you miserable is not the way you live life to the fullest.

Many people who choose careers that don’t make them happy will tell you that they would all do it differently if they had the chance. You only have one life, so don’t waste it working somewhere you hate just because of the money.

2. You’re more passionate about the work you are doing.

There is nothing worse than having to wake up every morning during the week to mindlessly go do work you don’t even care about. However, this is never really an issue when you are passionate about the work you do. If you are not forced to work somewhere because of monetary constraint, you truly enjoy what you do and you never really work a day in your life.

3. You can relate more to the work and come up with better ideas.

Being forced to do work is one of the most draining experiences. While there are times at every job where you may feel the work may be draining and dull, you have to realize that not every day is going to be an enjoyable one. There are highs and lows, but when you are passionate about the work you you look past the dull days. Your creative process is also different. You are more inclined to come up with creative ideas when you like what you do.

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4. Work doesn’t feel like it’s forced upon you.

When you value money over your overall health and your passion, you will find yourself in an endless cycle of misery. Work no longer becomes a career or a journey, but more of a  taxing nuisance on your mind and body that has to get done.

Every day that you go to work with this mindset you begin to hate your job more and more. While many people feel that they must work hard to retire and have money to enjoy themselves, what’s the point of enjoying yourself in your later years when you spent your life being miserable?

5. No matter how much money you make, nothing will help you overcome the feeling of doing something you hate.

Many accountants come into corporate America, put in reckless hours during the week and make a great paycheck on pay day. Many of them have all this money piled up, but they never really get to enjoy the fruits of their labor because their labor takes up most of their lives.

Many of them hate their jobs because they aren’t really passionate about what they do. Is there a worse feeling than doing something you hate? Eventually this hatred will cause stress and in the long run, it will have lasting effects on your health.

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6. You are more inclined to work later hours.

When you work somewhere that you are passionate about, putting in later hours isn’t as much of a burden as it is when you don’t like what you are doing. To you, putting in the extra hours doesn’t hurt as much because you don’t feel like you are forced to do it, which makes the experience that much more enjoyable.

Every industry has a busy season and without a doubt there will come a time when you will need to put in the extra hours. Will it be easier for you to work longer on something you can relate to or something you can’t stand doing?

7.You are willing to go above and beyond the call of duty.

Certain obligations at your work will require you to go above and beyond the call of duty. In certain times during the busy seasons, you may be asked to do certain tasks that are not part of your everyday schedule. It is much easier for you to put in the extra work if it’s something you actually care about. Because you are passionate about your job, you will be willing to put in the extra effort to go beyond what is required of you.

8. No obstacle will stop you from achieving success.

When you really enjoy what you do, nothing will stop you from getting your work done. Because you are passionate about what you do, you feel unstoppable and nothing can obstruct you from achieving greatness. Your passion ignites your work, and like a rocket, it accelerates you past road blocks that may come about. Any obstacle that comes your way is accepted and fought off with a creative solution.

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9. Our working careers will consume most of our lives, so we might as well do something we enjoy.

You will spend a majority of your life working and there is no other way around this fact unless you are born into a wealthy family or marry rich. For the rest of us who weren’t fortunate enough, we will be spending a good portion of our lives working in order to make ends meet.

There is no way around this, so we might as well accept the cards we are dealt. Many people go about this the wrong way because they feel like work is something they have to do rather then something they can enjoy. Once you realize that your career should be something you enjoy, then you will lead a more happy and fulfilling life.

10. You will get more fulfillment when you finally make it.

There are few feelings better than achieving a level of success you set out for yourself. Nothing like crossing off your bucket list of goals you set out for yourself to achieve. When you finally reach the pinnacle, it is that much more enjoyable knowing you got there doing something you love. Remember work doesn’t have to be something that you hate doing, stay true to yourself and always do what makes you happy.

The 10 Reasons You Should Follow Your Passion And Not The Money | Elite Daily

Featured photo credit: Randalyn Hill via unsplash.com

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