March 28th, 2012
Credit Q&A with Justine, Credit Advisor
11 Comments |
We asked our Facebook community to share their biggest credit questions. Justine, Credit Karma’s resident Credit Advisor, chose three questions to answer today.
“Why does your credit score get penalized for keeping your balances at zero and not having any charges or bills for a period of time?” (Jeff S.)
Your credit score won’t penalize you for keeping your balances at zero, as long as you show active monthly credit use. Regular credit use, either credit card usage or paying down loans, is what effectively builds your credit score. Without any credit activity, your credit score can’t benefit from responsible credit habits like a keeping a low credit utilization rate or on-time payments. Continue making small credit charges and paying your balance in full (an awesome habit to keep up!), and it’ll go a long way to build credit.
“How close to my real credit score is Credit Karma’s score?” (Jessica H.)
There is no single, “true” credit score. While the FICO and VantageScore are considered popular models, there are dozens of credit score models that lenders use to assess your credit, depending on the lender and what type of credit you are borrowing. Credit scores typically vary by a few points, but will place you in a similar risk range, such as good credit, fair credit or bad credit. Monitoring one score, like CreditKarma.com’s, gives you a picture of your overall credit health. You can read more about CreditKarma.com’s free scores here.
“How do medical collections affect your credit?” (Raymond A.)
Medical collections affect your credit the same way any debt collection affects your credit: the account in collections will significantly lower your credit score and remain on your credit report for at least seven years, even after you pay the bill. Get in touch with the collection agency pursuing you for your medical debt and offer to pay the bill promptly if the agency promises not to report the collection to the three major credit bureaus. If you can, get this agreement in writing. It’s worth a shot to try and negotiate. Good luck!