13 Sep Common Credit Score Myths: What You Need to Know

Lots of us have misconceptions about credit scores and how they impact our finances. These myths can negatively affect how we spend our money, pay off debt, and take out credit. In fact, acting according to credit score urban legends instead of facts can bring down your score and make it nearly impossible to access products like personal loans, credit cards, auto loans, insurance, and even rental prospects.

Let’s talk about common credit score myths and what’s actually true.

Myth 1: Closing Old Credit Cards Can Improve Your Credit Score

Closing old credit cards is bad for your credit score because it knocks your credit history. The longer your credit history, the better your credit score, as this shows lenders that you have experience using credit responsibly. The more experience with credit you have, the more likely lenders are to trust you with finance.

Myth 2: Checking Your Credit Score Hurts Your Credit

In reality, it’s not checking your credit score that hurts your credit, it’s who checks it and how you check it. There are two types of ways to check your credit: soft inquiries– self-checks– and hard inquiries.

Soft inquiries don’t bring down your credit score. Lenders and bureaux can’t see these checks since there’s no formal application tied to it, lenders don’t see it as a sign of potential credit risk. Formal credit applications necessitate a hard inquiry. These in themselves aren’t bad. However, too many hard inquiries on your credit report show lenders that you’re desperate for credit, which may make them uneasy about lending you money.

If you would like to check your credit without hurting your score, try Credit Boost’s free online credit check.

Myth 3: Paying Off Debt Quickly Will Hurt Your Credit Score

This is true and false. Paying off debt can bring down your credit utilisation rate, which is helpful if yours is high– i.e., more than 30%. However, if your credit utilisation rate is already low, paying off debt quickly could hurt your score since you’re de-diversifying your credit mix.

Myth 4: Only Missed Payments Affect Your Credit Score

Though missed payments do affect your credit score, numerous other derogatory marks, like debt review and judgments, can affect it too. Factors used in credit scoring algorithms, like credit utilisation rate, length of credit history, credit mix diversity, late payments, your account balances, debt-to-income ratios, and more play a role in calculating your credit score.

Myth 5: Credit Clearance Services Can Fix Bad Credit Overnight

While credit clearance services can vastly improve your credit score, they can’t fix bad credit overnight. It takes a minimum of 21 days for the bureaux to review a dispute you’ve logged and approve or deny it. If you have trouble collecting supporting evidence or have unpaid debts, this process may take longer.

Even if you do remove bad credit marks from your report, your credit score might remain low until you demonstrate responsible credit use, like maintaining a low credit utilisation rate and paying on time.

If you would like help building better credit, don’t be afraid to contact Credit Boost. We would love to help you reach financial freedom.

Check your credit score for free online today without impacting your score with Credit Boost’s free credit checker tool.