Common credit score myths

While establishing a good credit score is a vital piece of your financial picture, there are many common misconceptions about what affects it. Here is the truth behind common credit score myths.

 

Myth 1: Checking my credit score lowers my credit score

Checking your credit score rating is viewed as a "delicate force" which doesn't influence your credit score assessment. Activities, for example, applying for a charge card, which requires a "hard draw," for the time being can dent your financial assessment.

In case you're checking it from a genuine source, similar to the credit departments themselves, at that point it will not do any harm. However, in the event that you have a friend who works for a vehicle sales centre or is a home loan representative, and if they pull your credit as a favour, it might prompt for a lower score. Basically, if a lender or credit card issuer checks the score, it might have an effect on your score.

Myth 2: Having huge balance on my credit card boosts my credit score

Incorrect. Having sufficient balance on your credit card doesn't help your credit score to improve, it just can possibly hurt it and it will wind up getting costly over the long haul while paying interest. Also, it's a waste of cash to pay interest on your current balance provided your current balance is in abundance.

Unused balance in your account can straightforwardly influence your credit card use rate. The higher your credit card balance, the higher your use rate, which can thus hurt your credit score.

Myth 3: My earnings impacts my credit score

Your income and earnings are viewed as estimations of your ability to take care of bills, not your potential credit hazard.

Earning isn't even on your credit reports so it can't affect your score. While it's acceptable to realize that the size of your check has no impact on whether you have a good or average credit score.

Myth 4: A good credit score means you're wealthy

Incorrect. Credit scores are only an estimation of your risk (regardless of whether you pay your bills partly or in full). A decent credit score implies you're at a decent credit risk. A low score implies you're at a poor credit risk. Having a significant pay doesn't ensure a higher credit extension, but if you update your income with a card issuer to a higher amount, you may see increase in your credit limit which could be positive for your credit use proportion (as long as you keep on covering your balance every month)

Myth 5: I don't need to think about my credit score until I'm older

Incorrect. The base age at which you can apply for credit is 18 and from there you should start thinking and acting over your credit score. Financial experts suggest youngsters to begin building credit at the earliest. The length of your credit history is a major factor in your credit score, so the sooner you set up credit the better.



The bottom line

Credit reports, credit scores and credit bureaus seem complicated, but they don’t have to be. Educating yourself on what they all mean – and actions you can take – is a great first step.