Save Money, Learn 6 Credit Score Myths
Your credit score is the most valuable 3 digit number that you will ever own. It will either cost you money or save you money. Your credit score determines your rent payment, mortgage payment, insurance premiums, utility bills and even cell phone rates. Want more control over your credit score; manage your financial behavior.
The truth is not all of your financial behavior affects your credit score. Learn about which of your actions are damaging your score and which ones protect it.
6 Most Common Credit Score Myths
Myth #1 – Your Income Effects Your Credit Score
This is false. Your income is not factored into your credit score. Income and credit score have nothing to do with each other. You can have a bad credit score and earn a high salary.
Myth #2 – Closing Credit Cards Is Good For Credit Scores
This is false. Closing a credit card can have a negative effect on your credit score. When you close a credit card you affect your credit utilization. Credit utilization is factored into your credit score. It is the amount of credit available to you compared with the amount of credit you use. If you close a credit card you lower the amount of credit available to you which adjusts your credit utilization ratio.
Myth #3 – Checking Hurts Your Score
True and false. If you check your credit report you do not hurt your credit score because it is considered a soft hit. When a creditor pulls it for lending purposes it is a hard hit. This action could have a negative effect on your score if there are too many hard hits.
#4 – You Pay On Time, No Need To Check
False. Even if you always pay your bills on time your credit score may still suffer. Since mistakes occur and inaccurate information can be reported you need to check your credit report at least once a year. By checking your credit report you stay on top of any inaccuracies and can correct them on a timely basis.
#5 – Paying Cash Guarantees A Good Credit Score
False. Paying cash and never using credit can actually damage your credit score. You have not proven to creditors that you can manage debt; this makes you a higher risk than individuals who have credit and manage that debt responsibly.
#6 – Tiny Debts Don’t Count
False. Library fines and unpaid parking tickets can affect your credit score if they are reported. Libraries and municipalities need money so they have been known to report small unpaid debts to collection agencies.