In 1989, FICO (Fair Isaac Corporation, formerly Fair, Isaac, and Company) debuted their credit score system. This is the system that is employed by the majority of banks and creditors today, and the basis of its findings comes from information pulled from the country’s three credit bureaus: Equifax, TransUnion, and Experian. The mere mention of a credit score check is enough to inspire dread in many Americans, even if you have reason to believe yours is in good condition.

This is understandable, given that a poor credit score can affect your ability to secure loans, get a mortgage, and more. However, there are misleading credit score myths circulating, which only make FICO’s system even more intimidating. Here are the 6 most common misconceptions, and the truths behind them.

Myth #1: Checking Your Credit Score Will Affect Your Rating in The Future.

This one can prevent plenty of would-be borrowers from checking their credit scores, but it’s not necessarily true. Two kinds of credit checks are available. One type, known as a hard inquiry, does take a small amount of points away from your credit score, and is activated whenever a lender acquires your report. This may be performed when applying for a credit card or a loan from a bank.

Soft inquiries, on the other hand, make no impact on your rating. These are typically performed as an overall background check, such as if you apply for a job or pre-approved loans. Checking your own credit score also falls into the soft inquiry category and leaves your rating unaffected, no matter how often you check it.

Myth #2. There Is Only One Credit Score: FICO’s.

Yes, FICO is generally the most well-known credit score system, but it’s not the single, most authentic rating. In fact, there are different scoring models set in place by the credit bureaus, and there are unique ones for each industry (automobile insurance, mortgages etc.). The scoring criteria isn’t identical in one sector to another, and one lender may pull a different credit score to another.

This means you can’t predict the exact credit score a lender will apply to you with exact accuracy, though your level of risk is unlikely to vary greatly from one to another. If your score is close to a level’s cut-off point, it may slip a few points above or below. Building your rating and improving your level of risk will lead to a stronger rating across all scoring models.

Myth #3: My Score Dictates Whether I Receive Credit or Not.

Avoid getting too downhearted if your credit score drops far lower than you might like. A variety of circumstances can lead to a dip, affecting how well you manage your debts. A job loss, for example, may leave you temporarily without the necessary funds to cover your payments on loans, mortgage, etc., and result in a rating decrease. Perhaps you fall ill, become a parent, or have your hours at work reduced. Any and all of these will affect your financial situation and credit score.

However, lenders base their decision on more than your credit score. They will look at the amount of debt you currently have, employment history, and credit background. Even if you have a low score, the lender may well still be willing to extend you a loan. In the case of car loans, for instance, there are dealerships that will offer loans to all drivers, no matter what their credit rating, as long as they have sufficient income to make the required payments.

Myth #4: Credit Scores Take Years to Improve.

When you start building your credit rating, you may expect to see an instant change in your score and may become frustrated when it remains the same. Your credit score echoes your credit-related activities over a specific period of time and will rise or fall based on changes on your own credit report. Any hard inquiries performed will be added to the report right away and can make a few points difference to your rating in a short time. However, credit card companies tend to provide updated data to credit bureaus every 30 days or so, and the majority of ratings can be refreshed by as many as 20 points within three months.

Checking on a regular basis, perhaps once a month, will give you a fair idea of your rating.  You certainly should not have to wait months or years to see a positive change.

Myth #5: Credit Cards Are the Best Way to Build Your Credit Score.

Having a credit card and making your payments on time each month can help you improve your credit rating, but it’s not the only way, nor should you rely on multiple ones to do the job. Your credit score will benefit more from having various kinds of credit in your name, and different ones carry different weight. For example, a car loan or a mortgage (known as installment loans) can be more influential for your rating than several credit cards.

Try to get a few different types of credit on your report and be sure to make your payments on time. This will show that you can handle diverse debts with varying payment criteria.

Myth #6: Your Income Appears on Your Credit Report, So It Affects Your Chances of Securing A Loan.

Your income is not listed on your credit report. Your earnings only impact your score if you cannot afford to make your payments, which may happen if you take on more debt than you can handle. Lenders may estimate your income, but they will not be able to see your earnings just by checking the report itself. Provided you continue to make payments on your debts, potential lenders will have no reason to assume you cannot manage the loan you’re applying for.

Having a low credit score versus a god credit score, or one somewhere in between, will certainly have a significant impact on future financing. That is exactly why it’s vital to understand these credit score myths; to ensure you have a stronger grasp of how credit systems differences may affect your ability to secure loans. There’s no need to be intimidated or overwhelmed by them. The more you understand about your credit score, the better you will be able to manage it.

At Fairless Motors, we understand how difficult it can be to get an auto loan with low credit scores, which is why we want to guide you through the process of securing the financing you deserve, regardless of your credit score. After deciding on the right financing plan, we’ll go over our extensive inventory of quality pre-owned vehicles to match you with the right car or truck at an affordable price. We’ll take you through the process that ends with you driving home happy behind the wheel of your next used car.

6 Common Myths About Auto Loans

Most people, when purchasing a new auto, end up borrowing at least part of the money from a bank, credit union, or other financial institution. For some, this process can be filled with mystery and uncertainty. In some cases, a lack of knowledge about the auto loan process can even result in a choice to put off purchasing a new vehicle altogether.

Here are some common myths about auto loans. By understanding the truth about auto loans, you will be empowered to purchase the best vehicle for your situation, on terms that you are comfortable with.

1.    The Cost of a Loan is Too High to Pursue One

Many people believe that, by the time they pay off the loan, they will have paid so much in interest and fees that the whole thing will not be worth it. Nothing could be further from the truth!

While it is true that you will pay for a loan—after all, the bank or lending institution has to show some return on the money it allows you to use—the truth is that the cost of a loan is not usually going to be very high. This is especially true now that the Internet has allowed consumers to shop around for loans: the more lenders you have access to, the better your chances of landing a great deal on a loan.

2.    I Am Limited to Local Lenders

It used to be that getting a loan meant you went to the local bank (or credit union) and talked to someone about your credit. Your options were pretty much limited to those financial institutions within a reasonable distance of where you lived. This limited selection also meant that you would likely pay more for your loan—less competition for your business meant that lenders could charge more.

With today’s technology, this is not the case. With just a few minutes on the Internet, you can apply for loans from lenders across the country. This means more options for you, and a better lending experience overall. And of course, increased competition for your business means you are going to see more favorable loan terms.

3.    I Won’t Ever Qualify

It used to be a bit of a challenge to get a good loan unless you already had stellar credit. Today, this is not necessarily the case. While having great credit is always better than having poor credit, the reality of the situation is that the larger number of potential lenders (all vying for your business) means that more lenders will be willing to offer you credit than ever before.

Don’t let a non-existent (or poor) credit history stop you from applying. You will be surprised at how many options you have.

4.    No Lenders Want My Business

This myth is similar to the one above. Perhaps you have had a rough patch over the last few years, and your credit score is not as stellar as you would like it to be. Or, perhaps you have never borrowed before, and you feel like you don’t have the necessary track record to be attractive to lenders.

Keep in mind that with lending aggregate sites, you can fill out a single loan application and submit it to thousands of lenders across the country. With these kinds of numbers, it is pretty much a given that you’ll find a bank or other financial institution that is willing (and even wanting) to do business with you. So, give it a try, and see what kind of results you get!

5.    I Have to Pay Extra Each Month

Some consumers feel that it is a must that they pay off their loan early. Whether this is due to a common misconception about how credit works, or just a desire to be debt-free, this is a myth that must be addressed.

While it’s usually a good thing to pay off your loan early, it won’t hurt your credit to stick to the terms of the loan. Lenders want to see that you are responsible, and making your payments on time shows just that. Paying off a loan early may give you some additional peace of mind, but taking the full term of the loan can actually help you build your credit score.

Even if you do decide to pay off the loan early, there’s nothing wrong with taking a few years (as opposed to the full term of the loan) to get it done. You’ll show lenders that you are capable of managing your finances on an ongoing basis, and you’ll find that your credit score goes up as a result.

6.    My Credit Score Will Take a Long Time to Fix

If you have suffered some damage to your credit—such as by making a few payments late, or even defaulting on a loan—you may be of the opinion that it is going to take you too long to get things rolling again. The truth of the matter is, repairing your credit can be done much more quickly than you may believe.

Lenders understand that life happens sometimes, so a few late payments won’t really damage your score all that much, so long as they have been preceded and followed by several on time payments. And, as the saying goes, “A journey of a thousand miles begins with a single step.” So don’t put off repairing your credit, as you’ll have to start some time.

Don’t Let Credit Myths Dissuade You from Applying

Long story short, getting credit is not nearly as difficult as many people may believe. There are thousands and thousands of lenders out there looking for consumers with whom they may do business. And, with today’s technology, it’s easy to apply.

And, once you have a loan, you don’t have to put nearly as much time and effort into paying down the loan as you may have thought. Just make your regular payments, one month at a time, and watch your credit score rise.