Top 10 Credit Score Myths – Busted!
It’s time to put your knowledge to the test: How much do you know about credit scores? This little three-digit number may seem unassuming, but it has a massive impact on your financial wellness. In reality, bad credit causes many economic challenges, hindering your ability to qualify for a home mortgage, get a car loan, obtain low interest rates, and more. Below, we bust the top 10 credit score myths, offering expert tips on increasing your score and building a solid financial foundation for your future.
The Top 10 Credit Score Myths You Shouldn’t Believe
1. Viewing My Credit Report Will Harm My Credit Score
First up is one of the most common misconceptions about credit scores: that checking your score will lower it. False! It’s wise to stay vigilant and monitor your score regularly, which can help you quickly catch incorrect items, inaccuracies, or errors. You can file disputes with the credit bureaus to remove those errors from your report. Through 2023, you can view your report for free every week by visiting AnnualCreditReport.com.
2. I’m Young, So I Don’t Have To Worry About My Credit Score Yet
Well, it would be nice if you didn’t have to worry about your credit score until you were old, right? Sorry, that’s another myth. The minimum age requirement for credit applicants is 18. So, can you guess at which age you should start building your credit? That’s right: 18. The sooner you start building good credit, the better. The length of your credit history and account ages are two important factors that affect your score, so don’t wait to start building a solid credit history.
3. Keeping a Credit Card Balance Every Month Will Boost My Credit Score
Carrying a credit card balance from month to month harms your credit score, and paying the interest charges will cost you more money over time. If you can afford to pay your credit card balances in full every month but put it off because you think it will hurt your score, we beg you: Don’t do it! Even worse, carrying a balance will also negatively affect your credit utilization ratio, lowering your credit score.
4. The U.S. Government Owns and Operates the Credit Bureaus
The three major credit bureaus — Equifax, Experian, and TransUnion — are independently owned and not by the U.S. government. While thinking that the government owns the credit bureaus may make sense, it’s just not true. All three bureaus are commercial companies. However, the government does protect your rights via the Fair Credit Reporting Act, so you can access your credit reports and dispute errors.
5. All Three Major Credit Bureaus Report the Same Information
As we just said, each credit bureau is an independent commercial company. As such, they all receive and report on different information. Creditors and lenders have no legal obligation to report to credit bureaus; some might report to just one or all three. Each bureau has its own algorithms and credit scoring models that determine your credit score.
6. Paying Off Collection Accounts and Debt Removes Those Items From My Credit Report
Boy, it sure would be nice if this one were true, right? Sadly, it’s another myth. Paying off overdue debts or collections accounts doesn’t reverse the harm caused by late payments or remove the negative items from your report. Generally, negative items like missed payments or defaulted accounts will stay on your report for up to seven years. However, improving your score or making on-time payments can lessen the damage as time goes on.
7. I Can Pay a Company to “Repair” My Credit Report
We’ve all seen them: advertisements from “credit repair” companies promising to magically fix your credit report and wipe clean those negative items — in return for a hefty fee, naturally. Don’t be fooled. Only faulty or incorrect items qualify for removal from your report. And you don’t need to pay a company to make that happen. You can file the dispute yourself without spending a dime.
8. A Low Credit Score Means I’ll Never Get Approved for Financing
Even if you have a low credit score, you may still be able to gain financing approval. However, the lower your credit score, the higher the interest rates you’ll pay. Also, many people with poor credit have shorter, less-flexible repayment periods and larger down payments. Or, lenders may require collateral or a co-signer before agreeing to a loan.
9. My Credit Rating Doesn’t Matter Unless I’m Getting a New Loan or Credit Card
If you’re not planning on taking out a new credit card or applying for a loan in the near future, your credit score really doesn’t matter, right? Wrong. A poor credit score can impact your life more than you may realize. Utility companies, landlords, insurance companies, and employers will often request your credit report. Monitor your score, practice good financial habits, and pay your bills on time!
10. Using Only Cash or Debit Cards Will Increase My Credit Score
Here are the best and most effective ways to increase your credit score:
- Pay your bills on time
- Make smart financial decisions
- Avoid carrying balances on your credit card every month
- Manage your debt responsibly
Paying with cash and debit cards won’t affect your credit score, let alone increase it. However, you can earn a good credit score by establishing a positive financial history that shows you can handle debt and make on-time payments.
Build a Brighter Financial Future and Strong Credit History
Hopefully, we’ve officially debunked the top ten most common credit score myths. Building a solid financial history and boosting your credit score is no easy task. Yet — nothing worth doing ever is, right? For more information about managing debt, learning smart financial habits, and improving your credit score, call Boost Your Score at 1-800-259-1270 to request a consultation.
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