Your credit score plays a big role in your financial life and having a bad record can have negative consequences in several aspects of your life. But you’ve probably heard a lot of things about FICO score that are simply not true.
Myths are part of our everyday life, but some of them might have a bigger impact than others. When it comes to your credit score, here are some myths to bust:
1- ‘If you check your credit score, it will drop’
There are two ways of checking your credit score: hard inquires and soft inquiries. A hard inquiry is the one that creditors run before they approve your loan or credit line. Too many of these can lower your score, that’s true. But soft inquiries, which are basically quick looks just for educational purposes, won’t affect your score at all.
2- ‘If you close your credit card, you will improve your score’
Creditors like to see that you can use credit responsibly. So the best you can do is paying your full balance every month and not carrying debt. Closing all of your credit cards will actually hurt your score. If you do need to close accounts, start by closing the newer ones and keep the older ones open, because they are more helpful to your credit score.
3- ‘There’s no need to check your score if you already know it’s bad’
Most people tend to say this and it is just not true. A good and healthy habit is checking your score at least once a year. People with bad credit score tend to skip this step, but it is important to keep track of it. Mainly because credit bureaus make mistakes sometimes, and you might be penalized for someone else’s problems. If you find any error or incorrect information, you can report it to the credit bureau and have it removed, but if you don’t check your score, you won’t be able to find anything.
4- ‘If you pay your debt, it will disappear from your record’
This is not entirely true. Your debt will disappear…eventually. Credit records are long-term studies of how a person handles credit and debt, so every item remains in your credit history for seven to ten years.
5- ‘Only credit card debt will affect your credit score’
Unfortunately, this isn’t true. In reality, almost any kind of debt affects your score negatively, whether it is credit card debt, loans, unpaid parking tickets or overdue medical bills. Even paying your rent or utility bills late can have a negative impact on your score.