Stop believing these credit score myths everyone seems to be telling these days
Many credit card holders have common misconceptions about their scores and aren’t aware of how credit scoring works. Because these numbers are quite important, everyone should understand exactly how credit scores work. Overcoming these myths would help you in maintaining and improving your credit score.
Why is Your Credit Score Important?
- How you use your credit card has a huge impact on your credit score. As a borrower, your credit reports and credit scores help a financial institution determine whether or not you can repay your debts on time. Therefore, the creditworthiness of an individual or property helps in assessing the risk they pose to the creditor.
Your credit score has a huge impact on your ability to buy a home, get a loan, or even if you plan on buying high-quality appliances. FICO score above 670 is considered a good score.
Common Credit Score Myths and Misconceptions
- It’s important to ensure your financial liberty to pay your bills and repay your debt. But it’s even more important to fully understand your credit score and credit report, especially if you’re a borrower.
But unfortunately, many credit score myths can cloud your judgment. Let’s take a look at some of them.
Income Impacts Credit Score
People think that the more money they make, the higher their credit score gets. But the fact is, income doesn’t directly affect your credit score. FICO Points are calculated using various factors which are categorized as follows:
- Payment history (35%)
- The debt amount (30%)
- Credit history period (15%)
- New loans (10%)
- Loan combinations (10%).
Your income is not a determining factor for your credit report. Income is only important for credit card and loan applications.
Scoring Remains Same in Every Model
- Most people think that their scoring remains the same in all models but in reality, it’s not true. There are several scoring models to calculate your credit score and the results can vary depending on the calculation model used.
Some credit scanners scan your credit report at set times and take snapshots of what your credit report appears at that time. One of the models commonly used by lenders is VantageScore 4.0. It uses credit data that has been recently obtained from three national credit companies (CRCs), which differs from other models.
Debit Cards Can Help Credit Scores
- According to a survey, 42% of people think debit cards can create a credit history or increase credit value. But in reality Debit cards don’t affect your credit history, nor your credit score. Using a debit card is essentially like using cash. It doesn’t impact your score even if you choose “credits” when placing your orders.
Choosing a credit option for your debit card only decides how the seller processes the card and what fees you pay.
A Bad Credit Score Lasts Forever
- Bad credit does not last forever, your credit score improves over time. It only lasts permanently if you continue to make choices that compromise your credit score, such as late payments, lack of credit card, issuing payment invoices, etc.
Closing Unused Credit Card Improves Score
Some borrowers try closing their unused card thinking it would magically improve their scores. But that’s not how it works. If you don’t use a card, you can earn a huge amount of unused credit. So instead of closing the card, keep your account active and try to keep it in a safe place, since it is a credit grade asset.
- The popularity of such myths makes it a little tricky to understand your credit scores in their true spirits. By overcoming such misconceptions, you can improve your credit reports which play a prominent role in getting your loans approved.
If you want to fix your credit score, then stop believing in these credit score myths and start looking for a reliable and experienced credit repair company. Try Credit Repair Today. Credit Repair Today is a licensed credit repair company that provides credit assistance all across the United States.