Your credit score can say a lot about your spending history, whether you can be counted on to make payments, and let lenders know that you have built solid credit over a long time. Myths about credit scores abound on the internet and in real life: How do you know what’s true and what’s not, especially when it’s popularly believed? Here is a list of eight prominent credit score myths of credit scores vs. facts that lie behind them.
1. You Can Make Multiple Small Payments To Boost Credit
While you can make several small payments before your payment due date, these payments will only count as one payment. Unfortunately, you can’t “trick” your credit score like this to give yourself more points! It basically gives you a grade on whether you made the full amount of the payment by the due date listed — not whether you made a lot of payments over the course of a month or a week.
2. You Have One Score
This is perhaps one of the most widely-spread myths about credit scores. Though whichever program you use may generate one credit score for you to see, there are actually many scores and many ways for lenders to take a look at your credit. None of these is the “correct” score, as lenders can pull from many sources to check your credit.
The FICO score is one of the oldest credit scores developed for situations like mortgages and auto loans. Credit bureaus like Experian developed other types of scores to assess credit for lenders as well as people like you who want to see their credit scores.
3. You Should Close Old Accounts You Don’t Need Anymore
Old accounts don’t need to be closed: If you have a solid payment history but you’re simply not using an account anymore, it may be worth it to keep the account open and use it periodically to boost your credit score.
Closed accounts can affect your credit just as much as open accounts. You’ll still have a record of your payment history on file for lenders who want to check it, and these closed accounts will still be added to your credit’s “age”, so this fact can actually help you.
4. You Should Always Carry a Credit Card Balance
The truth behind this myth is multifaceted: You should regularly use your credit cards and make payments every month to keep your credit in good standing. You don’t, however, need to always keep a balance — meaning a debt you haven’t paid off — on the card. The account is open whether it’s been paid or unpaid, and this, as well as your on-time payments, is what affects your credit score.
5. You See the Same Score Lenders See
To restate a point made in myth number two, there are many different credit scores, and your lender will probably use the FICO score to determine your eligibility for a big purchase such as a home or a car. If you’ve kept up with your free credit score through a bureau, that’s great — but unless you’re regularly monitoring your FICO score, you will likely not get a true picture of your credit. The score your lender sees may be better or worse than the one you see.
6. You Don’t Need To Worry About Your Credit Score
If you have enough money to pay cash for everything, sure, maybe you don’t need to worry about your credit score. For most of the population, you will rely on your credit score, which is a summation of your credit history, your on-time payments, your number of open accounts, and the age of your credit to buy your first home, open accounts, apply for loans, and get a car. If you’ve never had any debt, it can actually be harder to build a good credit score because you have no record of on-time payments.
7. You Should Dispute Everything on Your Report
If there is a fraudulent charge on your credit card that brings down your score, or if an unauthorized lender has checked your credit and dinged your score, by all means, you should report these incidences. If you dispute everything just for the sake of getting your record cleaned up, this could actually get you into trouble with the law.
8. You Are Doomed If You Make One (or Two) Late Payments
This isn’t necessarily true. If you have a series of late payments, this can do some serious damage to your credit; however, don’t despair if you make a late payment and the rest of your credit history is great. We all forget sometimes. Consider signing up for automatic payments if you’re worried about this.
Remember the above myths, and remember, don’t believe everything you hear when it comes to credit scores! Get in touch with Coast Tradelines for more information on building and maintaining your credit score.
