Hey everyone!
If there’s one thing in adulting I wish I had a guidebook
for, it’s understanding credit scores. Picture this: fresh out of college, I
thought credit was a mystical force—something only bankers and finance gurus
talked about. Fast forward to me trying to rent my first apartment and getting
denied because of my “credit history,” or lack thereof. Ouch!
In my quest to figure things out, I’ve come across countless
myths and misconceptions. Today, I want to share with you five crucial credit
score facts and debunk the myths that led me astray. Let’s save you from the
mistakes I made!
1. Myth: Checking your credit score will lower it.
Fact: Checking your own credit score is known as a
soft inquiry and has no effect on your score. It's essential to keep tabs on
your score. You're actually entitled to one free report from each of the major
credit bureaus annually. However, when a lender checks your score because
you've applied for credit (known as a hard inquiry), that might have a small,
temporary impact.
2. Myth: Closing old credit cards boosts your score.
Fact: Oh boy, did this one get me! Contrary to
popular belief, closing old or unused credit cards can hurt your credit
score. Why? Credit age (how long you've had credit) and credit utilization (the
percentage of available credit you're using) play a big role in your score.
Closing an old account can decrease your credit age and increase your credit
utilization ratio. If you don’t want to use a card, just leave it in a safe
place, but reconsider cutting it up.
3. Myth: Carrying a balance on your credit card helps
improve your score.
Fact: No, no, and no! Carrying a balance means you're
paying interest, and it can increase your credit utilization ratio. It's best
to pay off your full balance every month if possible. If you can't, aim to keep
your utilization below 30%.
4. Myth: All debts are bad for your credit score.
Fact: Not all debts are created equal. While having a
ton of credit card debt can be damaging, having a mix of credit types—like a
mortgage, auto loan, or student loan—can actually be beneficial if managed
responsibly. Lenders want to see that you can handle different types of credit.
5. Myth: A low credit score will haunt you forever.
Fact: Your credit score isn't set in stone. If you
have a low score due to financial mistakes or a lack of credit history, there's
hope! With responsible credit behavior like timely payments and low credit
utilization, your score will improve over time. It's all about building and
maintaining good habits.
In wrapping up, if there’s anything I want you to take away
from my journey, it’s this: Your credit score is like a financial report card,
and it’s within your power to score an A+. Stay informed, avoid the myths, and
your future self will thank you!
If you found this post helpful, share it with someone who
needs a little credit clarity. Let’s debunk these myths together! 💪
#CreditScoreUncovered
