Have you ever found yourself struggling with low ratings, payments and high interest rates? Then, you should learn a bit more about credit scores and the basic (and classic) misconceptions that usually come with it. Let's get into it!
Do you think you understand everything you need to know about credit scores? Many consumers aren't sure they know exactly which are the factors that can help you improve or completely damage their credit score.
It's this lack of knowledge that leads to having problems with your ratings. So, if you are struggling with your balances and credit score, make sure you check the following classic misconceptions about this issue:
1. Only one credit score
This is one of the most common misconceptions of credit score. Although FICO is the most popular one, there actually are several models to calculate credit ratings. The range of credit score goes from 300 to 850. The higher the score, the better. It means that you are a perfect borrower and you will have better access to financial benefits.
2. You can improve your score by closing your credit accounts
Many people assure you that you can improve your score by closing your credit accounts. However, it's exactly the other way around! This is because it will lower the amount of credit available to you regarding the balances that you owe.
Even if you aren't using a credit card anymore, the available credit will remain high on your report, that's why experts always recommend keeping your unused cards open. If you keep a good payment record and opened accounts for quite a period of time, you will probably help to keep your credit score high.
3. Increasing your credit score can take a long time
If you missed plenty of payments and your credit score plunged, you don't need to panic! Avoid closing accounts with negative marks, that won't help. Creditors will still access to that information and will define how you handle debt.
There are more efficient ways to improve your credit. Remember that scores usually update every 30 days, so if you make payments on time and avoid using new credit, the number will increase by 20 points in three months.