Like it or not, those three little numbers that make up your credit score impact your life a lot. Of course, you can pay strictly cash for everything you purchase, but who can feasibly do that, especially if it’s a big-ticket item, such as a car or house. It’s a well-stated fact that you can’t get very far in life if you don’t have at least a decent credit score.
However, there are also quite a few credit score myths out there that need to be debunked. These myths can make a difference in your credit score and what it can do for you. In this blog, you’ll find a few credit score myths revealed.
Myth #1: Debt Consolidation Hurts Your Credit Score
The assumption that debt consolidation can hurt your credit score is a myth, but only to a point. If you use debt consolidation to pay off your bills, it will help raise your score, just as intended. However, if you take the debt consolidation loan and don’t use it for its intended purpose, then you’re going to be in worse shape than you were before. You also have to stick to your debt repayment plan and make sure to pay your loan on time to see the best results.
Myth #2: Checking Your Credit Score Will Cause the Score to Drop
The myth that every time you check your credit score, it drops your score a few points is just that, a myth. Checking your score will not affect your credit because it’s a soft inquiry. You can check your credit score as many times a day as you like. When you apply for a loan or a credit card, it affects your score because that is a hard inquiry.
Myth #3: Closing Accounts Will Help Your Credit
Many people think that closing credit card accounts will help to increase their credit score. In reality, closing those accounts can hurt your score. It can damage your score in two ways. The first is that creditors like to see a past credit history and how you do at paying your bills. The second, because closing an account will lower your overall available credit, which affects your credit utilization as well. If in dire need, look for an emergency loan for bad credit to help cover bills while avoiding closing old accounts.
Myth #4: Wealthy People Always Have High Credit Scores
The idea that wealthy people or people with high incomes always have excellent credit scores is a myth. Your credit score has nothing to do with how much you make or how wealthy you are. Your credit score is determined by how much credit you have and how well you pay your bills. The only way your income can affect your credit score is if you’re bouncing checks everywhere and your bank turns it over to a collection agency.
Myth #5: Using Cash or Debit Cards Raises Your Credit Score
Using cash or a debit card to pay for things might be a good idea when you can, but neither of these things affects your credit score one way or the other. To establish and improve your credit score, you have to have a history for creditors to report.
These are just a few of the myths out there about credit scores that need to be debunked. It’s important to establish and maintain a good credit score. Dispelling these myths will help you in your quest to do just that.