Credit Score Myths You Need to Stop Believing

Picture this: you’re ready to buy your dream home, and as you’re signing the papers, someone whispers those terrifying words: “credit score.” Suddenly, you’re awash with anxiety, wondering if that one late payment on your utility bill five years ago has secretly been sabotaging your entire future. Fear not, because just like pizza crusts in the hands of a toddler, credit scores are often misunderstood. Here are some credit score myths you need to stop believing.

Myth 1: Checking Your Score Hurts It

We’ve all heard the age-old warning: checking your credit score is like catching a glimpse of Medusa—it’ll freeze your financial life in place. But, let’s break this down. When you check your own credit score, it’s known as a ‘soft inquiry,’ and as soft as your favorite old T-shirt, it won’t hurt you. So, go ahead and check it as often as necessary, because knowledge is power!

Myth 2: Closing Old Accounts Boosts Your Score

Ah, the satisfaction of tying up loose ends! But before you go snipping those old credit cards, hear me out. Closing an account could actually lower your score by decreasing your available credit, which increases your credit utilization ratio. It’s like cutting off a perfectly good pair of shoelaces—might be tidier, but you’ll regret it when your shoes won’t stay on. Unless there’s an annual fee haunting you, consider leaving them open.

Myth 3: Debit and Prepaid Cards Improve Your Score

Ladies and gentlemen, debit cards are not the fairy godmothers of the financial world. As convenient as they are, they do not report to credit bureaus, so they’re as silent as a cat in the night when it comes to your credit report. If you’re looking to build credit, consider responsible use of a credit card instead.

Myth 4: Your Income Affects Your Credit Score

This one’s a doozy! Your income, no matter how grand or humble, doesn’t hold sway over your credit score. Lenders may look at your income to assess your ability to repay credit, but the score itself is a measure of how you use the credit you already have. So remember, it’s not about how much you earn, but how you use it!

Myth 5: Paying Off Collections Account Erases Them

Oh, if only rubbing a magic lamp could erase all evidence of past debts! Sadly, paying off a collection account doesn’t automatically remove it from your credit report. Instead, it may be marked as ‘paid,’ which can look favorable, but it’ll stay visible for several years. Patience and time are your best friends here.

“Many people mistakenly believe their credit score is tied directly to their wealth. In reality, it’s about credit management.” — Jane Entwisle, Financial Advisor

Myth 6: Co-signing Doesn’t Impact Your Score

If you’ve ever signed up as a co-signer thinking it won’t come back to haunt you, think again! When you co-sign a loan, you’re taking on full responsibility for the debt. Consider it the trust fall of financial commitments: if the person you’re vouching for misses a payment, you both tumble down in score points.

Still Have Questions?

If you’re wondering about the ideal score or how to climb the abysses of bad credit, keep in mind that credit scores range from 300 to 850, with the magic number being 700 and above for a ‘good’ score. Remember, each journey is unique, but if you play the credit game wisely, you’ll rise like dough in a warm oven.

Take Charge Today!

By debunking these myths, you’ve gained a clearer understanding of credit scores. Stop fearing and start monitoring your credit score regularly, pay bills strategically, and avoid impulsive account closures. You’re now ready to take charge of your financial destiny! Still curious or eager to make a change? Head to your favorite credit monitoring site and start exploring your credit journey today.

Sources:

1. https://www.consumerfinance.gov/about-us/blog/the-things-you-should-know-about-credit-scores/
2. https://www.experian.com/blogs/ask-experian/credit-myths-debunked/