Like most people, you probably think of your credit score as a measure of your financial responsibility. And while it is undoubtedly that, your credit score can also impact your finances in other ways. In fact, there are many myths about credit scores – myths that could be costing you money. So today, we’re debunking the most common ones. Keep reading to learn more.
1. You Should Avoid Using Your Credit Card To Keep Your Score High
This is a common myth, but it’s not true. Your credit rating is not impacted by whether or not you use your credit card. It is, however, affected by how much of your credit limit you use. This is called your credit utilization ratio, one of the most essential factors in your FICO scores.
So if you’re trying to keep your score high, avoiding using your credit card altogether is unnecessary. Ensure you keep your balances low and don’t max out your credit limit. However, using your credit card regularly is good; it increases your chances of securing instant cash loans.
2. Closing A Credit Card Account Will Hurt Your Score
Another common myth is that closing a credit card account will hurt your score. This is also not true. If you complete an unused credit card account, it can help your score.
That’s because one factor in your credit rating is the length of your credit history. So if you have an old credit card that you never used, closing it will shorten your credit history and hurt your score. However, if you have a newer credit card that you don’t use, closing it won’t impact your score as much.
There are other reasons you should keep an unused credit card account open. For example, if you have a good history with the issuer, they may be more likely to approve you for new credit products.
3. Your Score Is The Same Across All Three Bureaus
Most people know there are three credit bureaus – Experian, Equifax, and TransUnion. And while they do use similar criteria to calculate your score, they don’t use the same formula. So it’s possible to have different scores from each bureau. This is why checking your score from all three bureaus is essential. You can get a free copy of your Experian credit report and score here.
It’s also important to remember that lenders don’t just look at your score when considering you for a loan. They also look at the credit report, which includes information like your payment history and credit utilization ratio. So even if your scores are different, your credit assessment will likely be similar.
4. Checking Your Own Credit Report Will Lower Your Score
One of the most persistent credit score myths is that checking a credit assessment will lower your score. This is not true. Checking the credit report is called a soft inquiry, and it has no impact on your score.
Checking the credit rating report is a good thing. It allows you to catch errors and identify potential fraud. You can get a free copy of your credit rating report from each bureau once every 12 months.
5. Credit Scores Are Only Used For Loans And Mortgages
While your FICO score is vital for loans and mortgages, it’s also used for other purposes. For example, landlords may use your credit rating to decide whether or not to approve you for an apartment. And some employers pull credit reports as part of their background check process.
Nevertheless, the most common use of credit scores is for loans and mortgages. So if you’re looking to buy a home or car, it’s crucial to have a good credit score.
6. You Need A Good Credit Score To Get A Job
While some employers pull credit reports, they can only do so with your permission. They can only see your credit history.
So while having a good credit score may make you a more attractive candidate for some jobs, it’s not a requirement. However, your credit rating may be more critical if you’re applying for a job managing money.
There are a lot of myths out there about credit scores. But the most important thing to remember is that your score is just one factor in your creditworthiness. So as long as you manage your credit responsibly, you’ll be in good shape.
If you’re looking to secure a high-end loan, Gday Loans can help you by connecting you to credible lenders with affordable interest rates. They offer a variety of resources, including a credit score simulator and tips for improving your credit. Contact them today to learn more.