Like it or not, your credit score plays a big role in the numerous financial decisions you’ll make throughout your life. Renting an apartment, taking out a loan, qualifying for a credit card, and even applying for a job can all potentially be impacted by that magic three-digit number. For that reason, maintaining great credit or improving bad credit should be one of your first financial priorities.
In your quest to achieve great credit, however, you shouldn’t have to fall prey to myths and misconceptions. Here are 10 common credit score myths that we’ve debunked or confirmed in detail.
1. If I check my credit score, it will go down
Not true! Checking your credit score online is a “soft pull” or “soft inquiry”, a look for your own informational purposes, which does not affect your score at all. (Apps like Chase Credit Journey allow you to check your credit score for free.) A “hard pull” or “hard inquiry” occurs when a creditor checks your credit score, and too many of these may lower your score. If you have several hard pulls in a short period, it is a red flag to lenders because it appears as though you are desperate for a loan.
2. Closing a credit card will improve my credit score
False. Closing a credit card will do nothing to your credit score, and possibly even negatively affect it—you could lose the credit limit, which could worsen your utilization rate. Creditors also generally like to see that you have older lines of credit open.
If no longer wish to have a credit card, there are several superior alternatives to closing it. For one, if the card you’d like to close has no annual fees, then you can leave it open and never use it with essentially no consequences. If this isn’t the case, you can call your card issuer and ask them to convert the card into a no annual fee card.
The best scenario to close a credit card is when you’re being charged an exorbitantly high interest rate.
3. My income affects my credit score
This is not true. For instance, if you land a job with a salary that is significantly higher than your previous one, your credit score will not increase.
Income isn’t included in your credit reports. Your salary and income are only measures of your ability to pay bills and have little to do with your actual credit risk.
4. I don’t need to worry about my credit score until later in my life
False. Financial experts recommend that young people build credit. The minimum age at which one can apply for credit is just 18. Moreover, the length of your credit history is a key component of your credit score, so it would be best to start building credit as soon as possible.
5. Paying off debt increases my credit score
This is true and false in different cases: true for credit card debt, but not true for installment debts such as student loans and mortgages. However, it’s obviously good for you financially to be debt free.
6. If I get married, my credit score and my spouse’s will merge
False. Credit scores are unique to their owners—in fact, it’s against the law for lenders to take your relationship status into account when deciding whether to lend to you. If, however, you apply for a joint loan with your spouse, each partner’s credit score will be taken into account by the lenders.
7. Using a debit card improves your credit score
Not true. Debit cards do not have to do with credit, and thus have no influence on your credit score. Using your debit card is similar to using cash since funds are drawn from your checking account.
8. My employer can view my credit score
False. Prospective employers cannot see your credit score, although they can view a version of your credit report that does not include your credit score. Employers can look at your payment history and debts.
9. A perfect credit score doesn’t mean anything
This is true. While it is fun to boast about a perfect score, there are no loan and credit products that exist exclusively for people with a perfect credit score of 850. Once you reach roughly 760, you qualify for most available benefits.
10. Selecting “credit” when using a debit card improves my credit score
False. Regardless of whether you use the debit or credit option on your debit card, the money is still drawn from your checking account and no activity on your card will be reported to credit bureaus.
In conclusion, credit may seem confusing, but it doesn’t have to be. Educate yourself with the right information so that every action you take is in your best interest. Don’t believe myths without researching them first.