Top Ten Credit Score Myths --Busted!
Your credit score is one of your most powerful tools for planning your financial future --mostly because it determines the terms of loans like mortgages.
Unfortunately, there’s a lot of misunderstandings about FICO scores, and it can lead you to miss out on the benefits of your credit.
Don’t miss out! Read on to find out the truth about what affects your credit score, and to start reaping the benefits of your credit, contact us!
We’ll match you with the perfect mortgage that will set you up for financial freedom in a place you finally call home.
Myth #1 Checking Your Credit Lowers Your Score
There's a difference between you checking your credit and a creditor checking your credit. When you apply for credit, the creditor conducts "a hard inquiry" to review your rating. Only hard inquiries affect your score. Inquiries stay on your report for 24 months, but only the ones from the past 12 months affect your score.
The good news is that one or two inquiries a year are nothing to worry about. But have been applying for credit or loans more than three times a year, it may start lowering your score.
Myth #2 Your Debt-to-Income Ratio Affects Your Score
Debt-to-income ratio is the
Myth #3 The Higher the Debt, The Lower the Score
Not all debt is the same! Debt from a mortgage, even a $300,000 mortgage loan, is considered "good debt" because a home is a financial investment. $15,000 credit card debt, on the other hand, is bad debt.
Keep your credit balances low, preferably below 15% of the credit limits, and you’ll be on your way to maintaining your FICO high.
Myth #4 Paying Off Collections Raises Your Score
This one is surprising. Once a collection agency is involved, your score is going to take
Myth #5 Your Credit Becomes Joint with Your Spouse
When You Get Married Getting married doesn’t automatically include your spouse on your credit nor does it add you on theirs. If you want to be added to their account and possibly reap the benefits of their credit score, your spouse needs to call creditors to have them add you.
Myth #6 A Better Job Means You'll Have a Better Score
Despite credit bureaus having your employers information, they don’t have access to your salary or yearly income. So a better paying job won’t affect your credit score. On the other hand, higher income could mean you can now pay down debt --and that definitely increases your credit score!
Myth #7 If You Don’t Use a Credit Card, You Should Close It
The longer your credit’s open, the better it is for your score, so you never want to close credit cards. However, creditors may end up closing it if there’s no activity so try to use it (and pay it off) every month to keep it open.
Myth #8 Opening a Credit Card will Hurt Your Score
This myth is a little tricky. While opening a new credit account will make your score drop initially, it’s only temporary. After a few cycles of payments, your new credit will start to rise again and even improve from where it was in the first place.
Myth #9 One Late Payment Won’t Lower Your Score Much
Payment history is the most significant factors in your FICO score. Even just one payment that's late by 30 days lowers your score by 50 points or more.
Don’t let this happen to you! Set up a reminder or automatic payment schedule and avoid making this costly mistake.
Surprised by some of these credit myths? We bet you’ll also be surprised by how much you qualify for and the great terms we offer (even with less than perfect credit). Start your application today online, and you can be moving into your home before the end of summer!