1. Checking Your Credit Score Lowers It
One common myth about credit scores is that checking yours will cause it to drop. While this certainly isn’t always the case, there is some truth behind this one. Whether or not checking your score—or allowing someone else to check your credit report—will cause you to lose points depends on the type of inquiry. “Hard” inquiries affect your score, while “soft” inquiries do not. Hard inquiries are often performed by banks, credit unions, and other loan providers. These entities will run a check on your credit report in order to determine whether you can be trusted to pay back a loan, and how much you can afford to borrow. There is no hard-and-fast rule for how many points a hard iniquity will cause your score to drop. Instead, the number of hard inquiries you’ve had in the past 12 months accounts for 10 percent of your overall credit score. In most cases, soft inquiries are those that you perform yourself. You’re entitled to a free copy of your credit report from each of the credit bureaus once per year. There are also other sources and tools that you can use to access your credit score for free, such as through many credit card companies. These inquiries do not affect your score, and in fact won’t show up on your credit report at all. Checking your credit score regularly is a great way to start working towards improving it. It will also increase your chances of catching any mistakes on your report.2. All Debt is Created Equal
When you’re trying to maintain or improve your credit score, it’s tempting to fall into the trap of avoiding any and all debt. But while it is true that avoiding racking up unnecessary credit card debt is a smart financial move, it’s a myth that all debt is created equal. Debt that accumulates because of a student loan, home mortgage, or car loan is often necessary. Buying a home allows you to build equity, while also giving you a place to live. A car loan might allow you to get to and from a higher paying job, while that student loan can help you advance your career. In either case, having more money in your bank account can help you to pay off other debts and allow you to boost your score.3. Having More Income Means a Higher Credit Score
Landing a better-paying job can help you to be able to afford to pay more towards any outstanding debts you may have. But don’t fall into the trap of believing that your increased income alone is enough to boost your score. Your income or debt-to-income ratio does not appear anywhere on your credit report. Therefore, earning more money—or less—won’t directly impact your score. That doesn’t mean that you can’t use your increased income to improve your credit score. Instead of increasing your spending, use that extra cash to pay down your debts. Try to keep your debt at 30 percent or less of your available usage.4. One Mistake Can Ruin Your Score Forever
Missing a payment or closing too many credit cards in a short period can leave you feeling like you’ve ruined your credit score forever. Luckily, this is another common myth. Unfortunately, while mistakes may not last forever on your report, they can last long enough to have an impact on your ability to borrow money or get a good interest rate. A missed credit card payment will stay on your credit report for up to 7 years. This is often true even if you make the missed payment and pay any necessary late fees. Bankruptcy, a repossession, or a debt sent to collections can also all stay on your report for up to 7 or, in some cases, up to 10 years. While it is best to avoid these and other credit mistakes, if you do make one, don’t assume that means that your credit is ruined forever. In addition to disappearing from your report after 7 years, you can also offset some of the effect by making other moves to improve your credit, like checking for and fixing any errors or lowering your debt to available credit ratio.5. Getting Rid of Old Credit Cards is a Smart Move
When you’re trying to kick a spending habit to start improving your credit, it can be tempting to start cutting up credit cards and closing your accounts. And while reducing unnecessary spending is a great move, closing your credit cards is a bad one. A portion of your credit score is impacted by the age of your accounts. Closing an account could cause you to lose the benefits you were enjoying for the age of that account. In addition, closing an account means that your ratio of debt to available credit will drop, which can also lower your score.6. Married Couples Share a Credit Score
When you buy a home or car together or open up a shared credit card, you and your spouse are both equally responsible for the debt. However, while failing to pay back that debt can cause your score to drop, tying the knot doesn’t mean that you share a credit score. Each individual’s credit score is tied to their social security number. Your score is unique to you and only you. Failing to pay back a shared debt will affect both your score and that of your spouse.7. Catching and Reporting Mistakes on Your Credit Report is a Guessing Game
To many individuals, the idea that mistakes happen frequently on credit reports sounds like a myth. In fact, in one study, more than a third of respondents reported having found a mistake in their credit report. It’s also true that catching and fixing those mistakes is easier than you might think. All you need is a little help. With Credit Ninja, you’ll get expert help tracking down mistakes in your report. We’ll help you manage the misinformation and get every error corrected. That way you can start working towards more effectively improving your score. If you’re ready to see how we can help you start improving your credit score to set you up for a brighter financial future, get started today!You may also like
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