12 Credit Myths That People Think Are True But Are Actually False
Credit score myths can keep people from raising their FICO score that will eventually prevent you from buying a car, house, renting an apartment, getting approved for a major credit card, and other big purchases. A common credit myth is usually one that most people tend to be true. What does a credit score measure? How to report it to all 3 major credit bureaus for free? What is a good credit score? You’ll learn it all here just keep reading.
It comes to a big surprise when you think you have heard it all about credit, and like they say “do not believe everything you hear” it is always important to educate yourself when it comes down to finances, especially since it will impact the rest of your life. I found a series of credit myths on Instagram and maybe it will be a helpful tool for those searching for some truth in ways to improve their credit score.
1. Your Overall Income Impacts Your Credit Score
This myth is false, your income is not displayed on your credit report and just because a person is rich does not make them have excellent credit.
2. Married Couples Share Their Credit Score
This myth is false, when you are married, your credit score is yours alone.
3. Keeping a Balance Will Increase My Credit Score
This myth is false, you do not have to have a balance in order to show utilization. Carrying a balance just ends up costing you more in the long run because of those interest payments.
4. Paid Collection Debt Will No Longer Show
This myth is true, It is difficult to fully restore credit without paying off your outstanding debts; however, paying off a debt, in reality, can hurt your credit. Negative items on your credit report are usually allowed to stay on your credit report for seven years max. This 7 or 10 year starts clicking on the date of the last activity or the date of delinquency. And when paying off outstanding debt, you change the account status to the last date of the activity and as a result, can lower your scores.
5. Closing or Canceling Unused Credit Cards Will Decrease my Credit Score
This myth is false, this will cause your score to drop. The percentage of your credit card balances and available credit serves as a factor in determining your credit score. Closing your cards will actually reduce the amount of available credit and increases revolving utilization, which instead may lower your score.
6. It’s Better to Have No Credit Than Bad Credit
This myth is false, financiers look at credit history to see payment history and use this level as they assess your “risk level”. Therefore, no credit history will make approvals a lot more unlikely and difficult.
7. Co-Signing Means I Am Legally Responsible for That Account
This myth is true, When you co-sign on a loan or open a joint account, you are legally responsible for that account. *That means any activity will be displayed on both account holders’ credit reports (including you.)
8. Checking Credit Score Will Lowers It
This myth is false, viewing your own credit report is a “soft inquiry” and does not change your score. A “hard inquiry” is when a lender or creditor checks and can slightly change your credit score.
9. It’s Difficult to Improve Your Credit Score
This myth is false, you can rebuild credit over time with patience and debt management. Consistently make prompt payments and lenders will notice the negative marks on your credit history less.
10. I Am Unable to Restore Credit On My Own
This myth is false, you can when you allow experienced professionals to educate you and assist you in restoring your credit profile.
11. Getting a Derogatory Item Removed, Will Cause it to Come Back
This myth is false, not when it is removed legally, under the Fair Credit Reporting Act (PDF), it cannot legally be placed back on your credit report. The same law that requires its removal also prohibits it from being placed back on.
12. Hard Inquiries Stay on Your Credit Report for 7-10 Years
This myth is false, hard credit inquiries remain on your credit report for only 24 months and it will affect your credit score for 12 months.