Credit Check: 5 Myths to Ignore for a Good Score
If you have bad credit, any advice may seem like good advice. You wouldn’t want to remain in what seems like a hole, especially if there’s help out there to improve your situation. But you need to take all advice cautiously. There are numerous myths and legends out there when it comes to attaining a good credit score, and this information can do more harm than good. And the last thing you want is to seek a way out, only to have it push you deeper into the red. With that said, you can make choices that improve your credit score once you identify what the myths are.
Urban Legends & Your Credit Score
If we were to turn the topic of credit upside down to see various misconceptions, the scene would probably look like a mess. There are too many to keep track of. Fortunately, we’ll only cover some of the more common myths, some of which you may have already heard about.
Pulling Up Your Credit Profile Will Lower Your Score
Some people fear about having to pull up their credit profile. Maybe you’ve had such a concern at one point or another. If you’re scratching your head as to why this is so, there’s a good reason for it. Multiple applications for credit or loans means several credit checks, and that may signal a sign of desperation or poor payment history, resulting in soft or hard inquiries. However, the occasional credit check won’t hurt your credit score. Even if there’s a slight reduction in points, it wouldn’t be too significant. Creditors and lenders are also quite understanding in the sense that they can recognize why someone’s credit profile may be hit many times. For example, shopping around for a car loan, business loan or mortgage will often require multiple checks of your credit. In such instances, a creditor will count this as one inquiry.
A Good Career Automatically Means a Good Credit Score
Are you bringing in a high five or low six figure salary figure? Well, here’s a surprise for some of you – your annual earnings have little to do with your credit score. So even if you were (or are) a celebrity with a generous bank account, you could still have problems with your credit. First of all, creditors and lenders usually don’t look at your income as the main determinant (there isn’t even space to fill that info on a credit report). With that said, that info is a good indicator of whether you can pay off a loan or not. However, your credit score is a culmination of your behaviours; it’s all about your payment history, consistency, and other factors such as the type of credit used and the amounts owed. For this very reason, a six-figure earner can have a damaged credit profile if he or she regularly misses payments, while a recent graduate making only $30,000 who consistently pays their bills can have a perfect score.
Mr. & Mrs. Have the Same Credit Score
It’s true that a husband and wife become one after they tie the knot. If you’re married, you’d most likely agree that the financial decisions of your significant other can affect your wallet as well. However, your credit score isn’t bound together in matrimony – it’s still a standalone figure. It’s a common misconception that if one spouse has great (or poor) credit, that the other will share a similar score as well. That’s false. If the card or bill is registered under your name, YOU are responsible for the payment, not your other half. Now there are exceptions to this rule. If you and your spouse share a joint debt, then it’s possible that their payment behaviour may affect your score. However, this is not always the case.
Bankruptcy Destroys Your Credit
Declaring bankruptcy or just thinking about it is enough to throw you in a well of neverending worry. And it’s understandable since it means facing many financial limitations. A lot of people also assume that going bankrupt means having bad credit for the rest of their lives. This is not true. First of all, bankruptcy itself isn’t permanent; like a driving record with accidents or tickets, a tainted financial record reboots after a few years. In most instances, bankruptcy lasts for 6 or 7 years. But once that period of time is up, it’s cleared off your record and this allows you to have a fresh start with your credit. Hopefully, you never have to resort to filing for bankruptcy, but it’s comforting to know that the time will come when you can start rebuilding your credit again.
Carry a Balance on Your Credit Card
Some myths are misleading, while others are flat-out damaging. The idea of never trying to pay off your credit in full is one of them. For some reason, many individuals are preaching the “importance” of carrying a balance on a card to build a good credit score. The reasoning behind this myth is that paying off a balance slowly and regularly shows lenders that you are responsible with your payments – a flawed and counter-productive form of thinking.
For one, maintaining a balance on your card from month to month means paying interest on your purchases. You’ll end up dishing out more on your bills than you need to. Additionally, credit card companies see the inability to pay off a balance as a sign of irresponsibility, and this could hurt your credit score. That’s why it’s better to pay off your bill to the best of your ability. Even if you can’t do it all at once, paying the minimum on time can save you a lot of trouble down the road.
Revoking Credit Myths
When it comes to improving credit scores, not all advice is worth considering or even listening to. A lot of it are misconceptions from people who have simply heard wrong, or from truths that are now obsolete. If your credit score is lower than where it should be, make it a goal to speak to a reputable financial advisor who can help you build a good credit score. They can clue you in as to what practices will work best for you. In time, you’ll have a clearer understanding of what works and what doesn’t.