Whether you are a first-time credit card user or have been the holder of a card for some time, it doesn't hurt to learn as much as you can about how to improve your credit score. With so many financial blogs and resources available on the Internet, you need to be careful about what you believe. Although you may think that the more you read, the more educated you will become, this could be counterproductive to building up a healthy credit score. There are many credit myths floating around that will not only negatively affect your credit score, but could do other harm to your finances. Here are a few credit myths you should avoid:
Myth: Checking your credit report will hurt your score
This is not necessarily false, but there are a few misconceptions. When you are meeting with a lender or bank official about a loan or new line of credit, they will pull your credit report to make sure you will be a dependable borrower. This results in a hard inquiry, which will hurt your score if it happens too frequently.
Pulling a report on your own, on the other hand, will not hurt your credit score. You are allowed to do this soft inquiry once a year from the three major credit bureaus – Experian, TransUnion and Equifax. It is highly recommended to do this because you can check on the state of your credit and look for ways you can improve it. You can always avoid a hard inquiry by asking your lender whether you can provide your own report. Lenders differ on their policies regarding this, but it doesn't hurt to ask and help protect your credit score.
Myth: You have one ultimate credit score
You should be aware that there is no one, almighty score. There are generally two scoring models used to get your score: FICO and VantageScore. They assess your credit on the same level, but these scores will just be a bit different from each other. That said, responsible handling of your credit will help both types of scores.
Myth: Paying off an account and closing it will help your score
While paying off your accounts will definitely help boost your score, you should avoid closing them. Though your instinct after paying off a card may be to shut down the account, doing so would increase your credit utilization ratio. The higher this ratio is, the more harm it will do to your score. The best bet is to leave these accounts open and use them sparingly in order to help to continue to build up credit.
Myth: Credit scores are judged on money in accounts and assets
When you access one of your credit reports, nowhere on it will you see how much is in your checking account or your list of assets. You will also not see any information about stock or bonds you may have purchased in an account. How you handle your money can affect your credit score, but the state of these components will have nothing to do with your score.
Myth: Bad credit can influence you getting a job
Potential employers cannot directly turn you down for having a bad credit score. They may look at your credit report, which they can only do with your permission, to judge your character.