Credit Score Myths You Should Stop Believing
Credit scores play a significant role in your financial life. They determine your creditworthiness, which affects your ability to get approved for loans, credit cards, or even mortgages. Unfortunately, there are many misconceptions about credit scores that can cause unnecessary panic or bad financial decisions. Here are some credit score myths you should stop believing:
Myth 1: Checking Your Credit Score Hurts Your Score
This myth couldn't be farther from the truth. Checking your own credit score is considered a "soft inquiry," which won't affect your score at all. In fact, it's essential to check your credit score periodically to monitor your credit health and catch any errors that could hurt your score.
Myth 2: Closing Credit Cards Improves Your Score
Closing credit cards can hurt your credit score, especially if you're carrying balances on other credit cards. When you close a credit card, your available credit decreases, and your credit utilization ratio increases. A higher credit utilization ratio can negatively impact your credit score.
Myth 3: Paying Your Bills on Time Is Enough
Paying your bills on time is an essential aspect of maintaining a good credit score, but it's not the only one. Your credit utilization ratio and credit history length also play a significant role in determining your credit score. Aim to keep your credit utilization ratio under 30%, and avoid opening too many new credit accounts in a short period.
Myth 4: You Need to Carry a Balance to Improve Your Score
Carrying a balance won't improve your credit score. In fact, it can harm your credit score in the long run. Carrying a balance means paying interest, which can increase your debt and make it harder to pay off. Always pay your credit card balance in full every month to build a positive payment history.
Myth 5: Credit Scores Are Always Accurate
Credit scores are calculated based on the information provided by credit bureaus, which can sometimes contain errors or outdated information. You should regularly check your credit report and dispute any errors you find. Even a small error, like an incorrect address or misspelled name, can hurt your credit score.
In conclusion, don't fall for these credit score myths. Educate yourself about how credit scores work and stay vigilant about your credit health. With a good understanding of credit scores, you can make informed financial decisions and improve your credit score over time.