4 credit score myths you can’t afford to believe

By on June 4, 2021 0


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Your credit score isn’t just a random number, it’s an indication of how reliable your borrowing is. The higher your credit score, the more likely you are to get approval to open a credit card, take out a mortgage, or borrow money with a personal loan. So you can’t afford to buy into the many myths that circulate about credit scores. Here are some of those myths, debunked.

1. Closing credit cards is good for your score

You might assume that having fewer credit cards is good for your score because it means you spend and borrow less. In fact, closing accounts can hurt your score in two ways.

First, canceling cards means losing the credit they give you. And an important factor in calculating your credit score is your credit utilization rate, which measures your available credit versus the amount you’ve borrowed. If you close a card with a spending limit of $ 3,000, for example, your credit utilization rate increases as the amount of available credit decreases, and that’s not a good thing – keep that ratio at. less than 30% to avoid impacting your score.

Another problem with closing credit cards is the length of your credit history is also part of your score calculation. If you close an account you’ve held for a long time, your score could take a hit.

2. Checking Your Credit Report Hurts Your Score

It’s a good idea to check your credit report every few months to spot any fraudulent activity and see where your loan balances are. Checking your credit report won’t hurt your credit score, so don’t let anyone convince you.

On the flip side, when a credit card issuer or mortgage lender checks your credit report, it’s a tough investigation, and it’ll lower your score a bit. That’s why it’s a good idea not to apply for too many new loans or credit cards at once. But checking your own credit report shouldn’t be a problem at all.

3. The more you earn, the higher your score.

Income has nothing to do with your credit score. Rather, your credit score measures how well you pay your bills and manage your credit. While earning more money can make you more likely to face your bills, it is possible to be quite wealthy and pay your bills late, or accept too many bills and fall behind.

4. You and your spouse share a credit score

Married couples can share a lot, but a credit score isn’t one of them. When you get married, you always have your own credit score, just like your spouse. If you have joint debts like a mortgage, the way you manage them affects your credit rating the same way. In other words, if you fall behind on your home loan, your score will suffer, as will your spouse’s. But you can have a good credit score while your spouse has a bad score, or vice versa.

The more you know about credit scores, the better able you are to improve yours or keep it in good shape. Do not believe the above myths, although they may seem logical.

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