12 Credit Myths That People Think Are True But Are Actually False
Credit scores myths could keep you from raising your credit score that will eventually prevent you from buying a car, house, renting an apartment and other big purchases. A common credit myth is usually one that most people tend to be true.
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.
Myth #1: Your overall income impacts your credit score
Truth: Your income is not displayed on your credit report and just because a person is rich does not make them have excellent credit.
Myth #2: Married couples share their credit score
Truth: When you are married, your credit score is yours alone.
Myth #3: Keeping a balance will increase my credit score
Truth: 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.
Myth #4: When you pay off past due accounts, such as a charge off or a collection account, it will show as “paid” and no longer will be negative
Truth: 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 (7) 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 the last date of the activity and in result can lower your scores.
Myth #5: Closing or canceling unused credit cards will increase my credit score
Truth: This will cause your score to drop!
The percentage of your credit card balances and available credit serve 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.
Myth #6: It is better to have no credit than bad credit
Truth: 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.
Myth #7: Co-Signing means I am not responsible for the account or the payments
Truth: 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!)
Myth #8: Your credit score lowers when you check your credit score
Truth: Viewing your own credit report is a “soft inquiry” and does not change your score. A “hard inquiry” is when a lender or creditor check and can slightly change your credit score.
Myth #9: It is impossible to improve your credit score
Truth: 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.
Myth #10: I am unable to restore credit on my own
Truth: You can when you allow experienced professionals to educate you and assist you in restoring your credit profile.
Myth #11: When you get a derogatory item removed, it will just come back
Truth: 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.
Myth #12: Hard credit inquiries stay on your credit report for 7-10 years
Truth: Hard credit inquiries remain on your credit report for only 24 months and it will affect your credit score for 12 months.