Don't Fall for These Credit Score Myths
Your credit score plays a vital role in your financial health. It can impact your mortgage options and determine whether you can take out a loan or secure a credit card. Your score could even affect your living arrangements since many landlords use credit checks when evaluating a new tenant. Unfortunately, there's a lot of misinformation about credit scores ‐‐ particularly what raises and lowers them. Are you concerned about your credit score? Don't believe these all-too-common myths: Myth No. 1: Checking your score will hurt it. A hard credit check will slightly reduce your score. Those generally only occur when you're applying for a new loan or credit card. But pulling your annual credit report or checking your score through your bank is a soft check, and it won't decrease your score. Myth No. 2: Closing an account will help your score. Your credit history ‐‐ or how long you've had open accounts ‐‐ plays a big part in your overall score. Because of this, closing a long-standing account can negatively impact your score, especially if you don't have other long-term accounts in your name. Myth No. 3: Small balances raise your credit score. Your credit utilization rate matters: You don't want to carry a large balance because that can lower your score. But even carrying a small balance when you could pay it off means you're spending more on interest. Myth No. 4: Your income influences your credit score. Your credit score is only based on how you manage borrowed funds ‐‐ things like credit cards and loans (including car, student, personal and mortgage loans).