Do not let the year close without adding to your financial knowledge. Learn about the common credit score myths below and find out the facts that can help you create a stronger, more positive credit for 2021.
1. You only need to check your score before applying for a loan.
It is smart to periodically check your report throughout the year. This verifies your credit health or any instance of fraud or theft.
2. Zero debt is equal to a good credit score.
Actually, your level of debt is factored in your credit score, and next is your payment history. Even if you have paid all your debts today, it may take a few months or years for your credit score to rebound.
3. Debt is important to build credit score.
Using credit products is important to build a good credit score. However, this does not mean you should create more debt than you can afford. It is enough to open a credit card, charge a small amount, and pay it in full every month.
4. Applying for new credit will lower your score.
Inquiries can hurt your credit score, but this only accounts for 10%. All the other information on your credit score are also factored in. It can even be that your credit score remains the same after you have made an application for credit.
5. It takes seven years to improve bad credit.
True, most negative information stays on your report for seven years. However, as time passes, the les it impacts your score.
6. Disputing information will increase your score.
If you find there are inaccurate information on your report, you can – and should – dispute them. However, there is no guarantee that the information will be deleted.
7. Bad credit will never get you approved for anything.
A bad credit score makes it harder for you to get approvals, but it is not the only factor that lenders consider. Income and level of debt are also considered and you can get approved even with bad credit, just that you may need to pay a security deposit or take on a higher interest rate. But yes, you can get approved!