Credit Score Myths & Real Facts About Your Credit Score

The Top 12 Credit Score Myths

More and more people are talking about their credit scores lately. As they start to realize how important this number is, they start asking questions. They want to know more, like how their credit score hurts or helps them. There have been rumors going around about credit scores, and that has people worried. This article will go over the 12 biggest credit score myths or rumors about your credit score. Also, this article will give you peace of mind. It will help you make informed decisions. Especially, since you know what’s real credit score facts and what are credit score myths.

Woman at computer reading about credit score myths.

12 Credit Score Myths People Believe

1. Paying Bad Debt Will Remove it From my Credit Report

Your credit report is your complete credit history. Unfortunately for some people, this also means it reflects the good and bad. If you pay off your bad debt, it will show you paid it. However, it will also show any late or missed payments as well. Collection accounts, payment history, and bankruptcies can stay on your report for seven to ten years. It helps to immediately build credit after bankruptcy to help offset past credit history.

2. Carrying a Balance on Your Credit Card Helps Your Score

As long as you’re paying at least your minimum payments on time, carrying a balance won’t hurt your score. It also won’t help your score either. This is like credit score limbo, you’re personally losing out, but you score isn’t moving. Especially, if you carry a balance, you’re paying more in interest. That means you’re wasting money when you can don’t have to. If you miss your carryover balance by just one day, you can damage your score. It’s safer just to pay it off each month if you can. You won’t have to worry about it if you do that.

3. Your Credit Score Will go up as You Get Older

Another one of the credit score myths that are simply not true. Age does play a part in determining your credit score, but it’s only one part. Your payment history and how much of your credit you’re using or credit utilization factor in as well. If you’re older but have a bad payment history, your score will be lower. If your credit history shows you have maintained or improved your spending habits, your score will go up.

4. Your Score Will go up by Using Prepaid and Debit Cards

Prepaid cards and debit cards do not get reported to your credit agencies. You are spending your own money, and not borrowing it from a lender. Furthermore, these types of cards will do nothing to help you establish any credit history. If you’re afraid of getting a credit card, think about your personality. Do you always do assigned things on time, or never miss an appointment? Do you show up early? If the answer is yes, you should be okay with a credit card. Simply having a card won’t ruin your credit score, your spending habits will.

5. Closing Credit Accounts will Increase Your Credit Score

This is also a prevalent myth. Lines of credit and credit accounts can help establish your credit history. They factor into your credit score as well. If you close these accounts, you can end up hurting your score. The accounts stand for the credit you can use. Lenders stack this against the amount of credit you currently have. They want to see that you have lots of credit available, but are only using a little of it. If you close credit accounts, the ratio shifts and usually it turns against you. Close newer accounts first if you have to shut down any at all. Lenders want to see the age of accounts, a longer credit history with one facility. So closing new accounts won’t hurt your score as badly.

6. One of the Biggest Credit Score Myths – There is Only One Credit Score

There are many different credit scores out there. A FICO score and Beacon are the two that most lenders check. Every lender you work with can look at various credit ratings, and a report can have several listed. Also, if you’re trying for a loan, ask them which ones they use. You can check them to see what your report has listed.

7. Getting a New Credit Card Will Hurt Your Credit Score

Typically, a credit card will only drop your credit score by a few points, usually no more than five. If your score is in the 700s, you don’t have to worry about it falling a few points. If your score is in the high 500s to low 600s, you should look into secured credit cards. These can help you build your credit. You can see if you’re ready to handle the responsibility of a new credit card. You will also be able to gain those points back quickly with responsible use.

8. You Don’t Have a Credit Card or Credit Card Debt, so Your Score is Higher

This myth is also false. If you don’t have a credit card or payment history, your score could be lower. Having a history of on-time payments and responsible credit card use helps determine your score. Lenders like to see you have a history of paying off debt on time. They also like to see responsible credit card use, and you can only do this with lines of credit. If they see you have no credit history, they might see you as a liability.

9. Only Certain Bills Show up on Your Credit Report

If your local library reported your fines to the credit bureaus, they would show up on your report. Whether or not your unpaid bills show on your report is up to the lender. Bigger lenders like mortgage companies and credit card companies are the standard ones that report your accounts to the bureaus. Also, medical offices can turn your accounts over to collections and report them as well.

10. Your Score Will go Down Every Time Someone Pulls it

There are two types of inquiries when you deal with your score, and they are hard inquiries and soft inquiries. A hard inquiry will drop your score by a few points while a soft inquiry will not. A hard inquiry means you applied for a loan or credit card. This will drop your score a few points. A soft inquiry means a creditor pulled part of your report for education. This is also why you get pre-approval messages in the mail, and this won’t drop your score.

11. Only Check Your Credit Report if There is a Problem

You should pull your credit report once a year. This is a way to check for errors that could be unfairly lowering your score. The only way you’ll know of a mistake is by watching your credit report. You can pull them once a year for free. Protect credit card data, by keeping an eye on your credit report. It could also help you catch identity theft faster.

12. Your Income Level Can Hurt Your Credit Score

Another one of the credit score myths that are simply not true. The only way your income level can hurt your credit score is if you can’t pay your bills on time. Your income level isn’t a factor to help or hurt your score because it’s not listed.

In conclusion, this article has listed the top twelve biggest credit score myths about your credit score. If you hear something that doesn’t sound right, research it. You’ll never know the truth unless you ask questions. Your credit score is important to you being able to apply for mortgages or loans. The higher your score is, the more opportunities you will be eligible to get. Lastly, take the time and monitor your score, if you see something wrong, ask about it. It’s worth it to have a correct credit report so you can work on fixing it.

Monica Kowollik

Director at CreditFast.com
Monica has covered credit card and personal finance news for over 15 years. From an early age, she developed an interest in financial literacy and saving money. Monica hopes to help others to improve their personal finances one article at a time.

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