Credit score myths are the kind of things that can get you into trouble. They’ve been around so long, that people think they’re true! This article will help you understand what’s fact and what’s fiction when it comes to your credit score.
1. Checking your credit score hurts it
Checking your credit score can help you understand how your credit is being used and if you are making payments on time. It’s important to check your score so that you know what information is in there and how it affects your ability to get a loan or other services.
2. You need multiple credit cards
You do not need multiple credit cards to build a good score. In fact, you only need one card (and maybe a second if you’re applying for a home loan). The more accounts you have, the higher your debt-to-income ratio. If you do so experts at SoFi think, “You’ll appear risky to lenders and that will likely be reflected by a dip in your credit score.”
3. Your income affects your credit score
Your income and income history are used by lenders to determine your ability to repay a loan. If a lender is lending money to you, they want to make sure that you have enough income coming in each month to make the payments on time. This is why your credit score considers how much money you make each month.
4. The size of your monthly payment determines your score
This is a common misconception. The size of your monthly payment is a factor, but it’s not the only thing that matters when it comes to your credit score. The most important factors are how much you owe and how long you have had credit.
5. Applying for credit can drop your credit score
Does opening a credit card hurt your credit? Applying for any type of credit, whether it be a mortgage or a credit card, can drop your score. The idea is that this is like applying for a job: if you don’t get the job, you don’t want to apply for anything else in case you get rejected again! This isn’t true—you can put in an application at multiple companies and not ruin your chances of getting hired somewhere else.
6. Closing an old account will help your score
You may be tempted to close an old account if it carries a large balance or has been inactive for some time. It can help your score if you have only a few accounts and the one being closed is new (less than two years old) or part of your credit mix. However, if you have many open accounts with small balances, closing one will hurt your score more than help it. credit national assist
7. Paying off a loan hurts your credit score
It’s true that paying off a loan will help your credit score, but only if you are current on payments. If the loan is past due or was in default, then paying it off won’t help your credit score at all.
If you’re current on your loans and want to improve your score, pay down high-interest-rate debt first. This will have the most immediate impact on your score and can bring it up by as many as 100 points.
The most important thing to remember is that your credit score is just one factor in determining whether or not you’ll get a loan. It’s only one piece of the puzzle, and it’s not the only one that lenders consider when deciding whether or not they’ll lend money.