There are lots of myths and misinformation about credit scores – some people think it helps their score to carry a balance on credit cards- not really, just costs you interest every month. Or that bad credit will affect deposits on utilities or the amount you pay in insurance. Here are some myths that may help you improve your score.
-Always carry a balance on your credit card. No, you do not need a balance on your card, creditors like to see that you make your payments on time and that you do not max out your available credit. If you do carry a balance, try to keep it under 30% of the available credit.
-myth – it’s ok to pay your credit cards a day late if you pay them in full. No. Always make your payments on time. A late student loan payment can drop your score 100 points. A late credit card payment will also affect your score.
-Closing old credit cards will erase negative history. No, sorry – credit reporting agencies keep your information on file for seven years. The longer you use a card, the better – your length of credit (time you have had a credit card) helps your credit score. By closing old cards, you can lower that percentage and lower your score.
-If you never had credit, you have a perfect score. No, again, creditors like a history. If you have never used credit, lenders don’t know how you will treat credit – will you make your payments on time? Only your history can tell that story. No credit typically means no score. Start slowly and build up, but that doesn’t mean open 10 credit cards either! A good balance – installment loans and credit cards help your score.
-Checking your score will hurt you. It depends on how you do it – if a lender (like a mortgage company or bank) pulls a hard report (what we need to approve you for a mortgage), it will affect your score by a few points. But if you are looking at your score yourself, it’s a soft check and doesn’t affect your score. So use websites like creditkarma or your credit card sites to check your score.
-Paying off a student loan early will hurt your score. No. Paying it off early doesn’t hurt you, may not help but at least you are not making late payments!
Common sense is the most important thing when it comes to credit scores – make your payments on time, don’t abuse credit cards and you should be ok! Credit is important and as long as you don’t abuse it, your credit score will be good! The worse time to find out your credit score is bad is when you are buying a home!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
