There are several misconceptions about maintaining a healthy credit score. Many people worry about their actions or practices, which may have little to zero impact on their credit scores. So, you need to understand these myths to manage your credit score more efficiently. This blog will talk about common myths regarding credit scores, which you may think will hurt your credit score.
Common Myths About Credit Scores
- Regular Check of Credit Score Lowers It
One of the most common myths is that frequently checking your credit score will negatively impact it. However, in reality, this is not the case. There are ideally two types of credit inquiries – soft and hard inquiries. Pulling your credit score from a credit bureau is regarded as a soft inquiry and does not lower your credit score. Hard inquiries happen when a lender examines your credit score as a part of a loan or credit application, which can only impact your score a bit.
- Monthly Income Affects Credit Score
Another misconception is that your monthly income greatly impacts your credit score. Even though income plays a vital role in your ability to manage and pay off your debt, it does not influence your credit score calculation. Your credit score primarily depends on your credit history, including payment history, credit utilization, new credit, and types of credit accounts. So, even if you have a high monthly income, it will not directly boost your credit score if you have poor credit management practices.
- Credit Score is the Sole Determinant to Get Loans or Credit Cards
It is a common belief that a credit score is the sole evaluation factor to determine your capability to get loans and credit cards. Even though a good credit score is significant, lenders often consider several other factors to evaluate your creditworthiness. These factors are, of course, your credit score, as well as your credit report, income, employment history, and debt-to-income ratio. Lenders often evaluate all these factors to get a comprehensive view to assess your overall financial health and ability to repay the debt. Therefore, it is crucial to maintain a strong financial profile and a stable income, even if you have a high credit score.
- Closing Old Accounts Can Improve Credit Scores
Many people think that closing their old credit accounts will help to increase their credit scores. However, it does not happen like in reality. In fact, closing your old accounts can sometimes harm your credit score. After all, the length of your credit history is a determining element in your credit score calculation. Older accounts provide a long credit history, which can positively influence your credit score. Besides, closing your accounts can increase your credit utilization ratio if you have an outstanding balance on other cards. That’s why it is better not to close your old accounts, even if you are not using them frequently.
- Debit Cards Can Build a Credit Score
Some people believe that using debit cards can improve their credit score, which is a complete misconception. Debit cards are connected to your account and do not involve borrowing or credit. Credit scores are also influenced by credit activities such as utilizing credit cards, taking loans, and making timely payments. You can engage in credit-based transactions and manage them responsibly to build your credit score.
The Final Takeaway
By knowing these things that you think might harm your credit score, you can make informed decisions about managing your credit. After all, your credit score is a crucial part of your financial profile, but it is not the only thing lenders consider when evaluating your creditworthiness. So, you should focus on maintaining a stable income and a good credit history to build a strong credit profile.
