7 Common Credit Myths

 

When you want to borrow money from a financial organisation, your credit might become quite significant. It is critical to understand your credit since it may have a significant impact on your ability to obtain a loan, create bank accounts, and obtain a credit card with a fair interest rate. Here are seven popular credit myths:

 

Inquiring about your Credit Score is detrimental. 

 

That is not correct. You may request and obtain your credit score without incurring any penalties. Your credit score may be impacted if a third party requests your credit report when you apply for a line of credit.

 

Credit card closures assist to boost credit health. 

 

This makes sense, but it may not always be correct. Clipping a card reduces the amount of credit accessible to you, restricts the credit history for that account, and perhaps lowers your credit score. Furthermore, cancelling a credit card does not erase your credit history on that card. Negative Credit Card balances, in reality, remain on the record for 6 years from the day the account initially became late.

 

Your credit is unaffected by co-signing. 

 

Even if you co-sign on a loan, you may be liable for the debt. If the other party fails to make a payment or a series of payments, your credit score may suffer as well.

 

Higher compensation equals higher grades. 

 

Your wage may have no effect on your credit score. Credit ratings are often based on how successfully you pay your payments, rather than how much money you have available to pay your debts. If you have a better wage, paying down your credit card debt may help your credit.

 

Paying the bare minimum keeps my credit score up. 

 

Many creditors consider how much you owe in comparison to the amount of debt you have accessible. Carrying a large amount of debt and paying minimal payment may not be enough to improve your credit score.

 

Divorce eliminates the previous spouse's poor credit practises. 

 

This is not always the case. You can contact your creditors and request that your joint accounts be converted to separate accounts, but divorcees' accounts will not be automatically split when the divorce is finalised. Even after you divorce, your accounts may still be joint, which means your ex-credit spouse's practises may continue to damage your credit. In addition, joint accounts that have been cancelled may still appear on your credit record.

 

Every credit report is the same. 

 

TransUnion's report, for example, may include different information in different forms than the reports provided by the two major Credit Reporting Agencies. That is why it is important to monitor both credit bureau reports.

 

Keep these myths in mind to prevent potentially costly blunders. Begin your journey toward better credit the old-fashioned way: don't take on more debt than you can handle and pay your obligations on time.