Lenders take people's credit scores very seriously. You do not like to lend money to people who are not trustworthy enough. But aside from that, there are also a lot of myths circulating about credit score results, and bad information isn't going to do anyone any favors. If you know how things work in the credit score game, make sure you're doing everything you can to keep your credit check score high. But more importantly, it will help you avoid anything that could hurt your score.
When it comes to credit, it's critical to distinguish fact from fiction and understand how to trade. Add to that the proprietary nature of credit scores, whose formulas are closely guarded secrets, and navigating the credit waters becomes even more confusing. Here are 5 myths that will hopefully eliminate all unnecessary misunderstandings.
1# Checking your credit report hurts your score
People seem to believe that checking their credit report will lower their score. This is not true. Checking your score on your credit report is considered a soft inquiry, while lenders checking your score is considered a hard inquiry. In fact, checking your credit report will only help you, as it will help you keep track of whether false information has been registered or if you have fallen victim to a scam.
2# Closing old accounts increases your credit check score
If ever there was a wolf in sheep's clothing when it comes to credit mistakes, this is it. This myth will actually do more harm than good. Closing old accounts will actually lower your score. The reason is that it makes your credit history appear shorter. There are two reasons for this; Old accounts show how long you have credit, and it is added to the credit you have in your name. The older and the more credit you have available, the higher your credit score will be.
3# Applying for a new loan lowers my credit score
This is not entirely true. It's only half a myth, but I thought I'd add it anyway. Applying for new credit will lower your score if you apply for multiple credit cards in a short period of time, as this would increase the number of hard inquiries you receive. Hard inquiries knock about 5 points off your score, so proceed with caution when applying for more credit. But as I said, inquiries only account for 10% of your overall credit check score. However, if you apply for a mortgage or car loan, multiple inquiries from these types of lenders are generally treated as a "single inquiry" that has little impact on your credit score.
4# Paying credit cards in full increases your credit check score
The only thing it is good for, to pay your bill in full, is your wallet. Doing the right thing sometimes has the wrong effect on your credit score. Realizing that creditors are businesses and are only there to make a profit will help you understand why paying in full is not a good idea. If they know they won't make money off you, you become a liability. It's strange how it works, but a credit card with a perfect payment history and no balance doesn't raise your credit score as much as a credit card with a low balance does.
5# Other people in my household with poor scores can hurt my credit score
This used to be the case, but is no longer true unless you are a financial partner in a joint account, mortgage or other form of credit. If you are not financially connected in this way, their credit history will not be linked to yours. Until a few years ago, lenders were allowed to consider the creditworthiness of people with the same last name in a household, but that no longer happens. Lenders must treat you as an individual.