You probably know how to improve your credit score by now, but did you know some of these are myths?
Not all credit score improvement tips are realistic at all in improving your credit score.
Some of these credit repair services may even harm your goal of improving your credit score.
Find out more about these myths you may be doing right now.
How To Improve Your Credit Score: Myths You Must Know
Myth #1: Leaving A Balance On Your Credit Card Every Month Builds Your Credit Score Quicker Than Paying The Card In Full Each Month
Fact: You will not improve your credit score faster by leaving a balance on your credit card each month.
Leaving a balance on your credit card each month will incur interest charges.
This will eventually hurt your credit score in the long run.
The pace on how you improve your credit score is based on how long you have been maintaining your account and not whether your account has a balance.
Myth #2: Credit Scores Are Based On How Regularly You Pay Your Bills On Time
Fact: This statement is somewhat semi-true, though your credit score is not solely based on if you pay your bills on time, it’s a plus.
Your payment history is not the only measurement of how your credit score is built.
In fact, the following comprises your credit score:
- 35%: Payment history
- 30%: How much you owe
- 15%: Extent of credit history
- 10%: Recent credit
- 10%: Other aspects such as your credit mix
Your credit score also gives importance to your long credit history. Your score may decrease if you’re constantly opening new accounts.
Myth #3: Charge Cards Are Regarded The Same As Credit Cards By Credit Scoring Models
How do charge cards affect my credit score? https://t.co/4tCFkPPCfC
— The Points Guy (@thepointsguy) July 31, 2016
Fact: The credit obligation correlated to charge card is similar but not the same as a credit card contract.
A charge card works differently as a credit card in a way that its balance is payable in full every month.
A credit card balance can be “revolved” on the following month.
A charge card doesn’t have credit limits whereas credit cards do.
Myth #4: Examining Your Credit Can Hurt Your Credit Score
Fact: Checking your credit report does not affect your credit report.
In fact, regularly checking on your credit report is a healthy financial habit.
The law entitles you to one report from one of the three credit bureaus every 12 months.
The one thing that would adversely affect your credit score is when a lender asks to pull your score due to a new line of credit you applied for.
Myth #5: Closing Credit Card Accounts Can Improve My Score
Fact: Closing out on your credit cards do not improve your credit score, and in fact, can do harm and leave you with a lower score.
Closing out a credit card account loses the value of your card’s credit limit used in credit estimation.
The credit utilization ratio is important in determining balance to limit ratio.
If you close your credit cards, especially those with large credit limits, you will mostly increase your credit utilization ratio.
Myth #6: The More Loans You Acquire, The Better Your Credit Score
Fact: It’s not the number of loans you take in that will measure your score growth.
In fact, it is how the borrower maintains these loans and the length of these loan accounts that will increase your credit score.
Improving your credit score means you only need to maintain quality loans and keeping them in good standing with regular payments.
Myth #7: Medical Debt Can Hurt Your Credit Score
Fact: Your medical debts are never considered in any setup if it comes straight from a medical facility.
It is only when your medical debt is endorsed to a third-party collection agency and not settled that your credit score will be affected.
Settled medical collections will not factor in your credit score.
Want to know more about myths on improving your credit score? Watch this video from MoneyWatch:
Maintaining a healthy credit score can mean a lot to many people.
Following some of these credit score myths can prevent you from maintaining a good credit score.
There are no shortcuts on improving your credit score.
What is important is to follow the basic rule in keeping good credit score by being a responsible borrower.
Do you have other credit score myths to share? Please let us know your thoughts by leaving your comments below.
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