It’s hard to navigate the world of credit scores when there are so many common myths about your credit floating around — causing people to get confused.
Today, I’m here to explain a handful of these popular misconceptions, so you don’t fall trap to the myth.
The truth behind this misconception is that “hard” checks will lower your credit score, but “soft” checks won’t. Have you heard this common myth about your credit and do you know the difference?
A soft inquiry, such as when you check your own credit score or when a lender pre-approves you for a loan, does not affect your credit score. Hard inquiries, which occur when you apply for a new line of credit, can temporarily lower your score, but checking your own score is harmless.
Many people believe that closing old credit accounts will boost their credit score. Some banks will even tell you that you have to close credit, but that isn’t always needed. In reality, closing credit can often have the opposite effect on your score.
Closing an old account can reduce your overall available credit, which may increase your credit utilization ratio (otherwise known as debt to credit ratio) — the amount of credit you’re using compared to your total available credit.
A higher utilization ratio can lower your credit score. Additionally, the length of your credit history is a factor in your credit score, and closing old accounts can shorten your average account age.
Another common myth is that carrying a balance on your credit card from month to month will help you build credit.
While it is important to use credit cards responsibly to build a credit history, carrying a balance and paying interest is not necessary. In fact, paying off your balance in full each month demonstrates good credit management and can help improve your score without incurring interest charges.
So, don’t keep a balance and instead pay off your credit cards monthly to help boost your credit score.
While your income is a critical factor in your overall financial health, it does not directly impact your credit score.
Your credit score is determined by factors such as your payment history, credit utilization, length of credit history, types of credit accounts, and recent inquiries. Lenders may consider your income when deciding whether to approve you for credit, but it does not play a direct role in calculating your credit score.
Paying off a debt is a positive step, but it doesn’t mean that the debt will immediately disappear from your credit report. Paid debts can remain on your credit report for up to seven years, depending on the type of debt.
However, the fact that the debt is paid off will be noted on your report and can positively influence your credit score over time.
Another common myth about your credit is that having multiple credit cards hurts your credit score. In fact, having several credit cards can be beneficial if managed responsibly. The key is to keep balances low (or paid off fully) and always make payments on time.
I do want to note that applying for many new credit cards in a short period can lead to multiple hard inquiries, which can temporarily lower your score.
Speaking with a professional about your credit is a huge step in the right direction. If you don’t have perfect credit, you still can qualify for a mortgage. Please reach out to me today and we can go over your situation and see whether or not you can get approved. If not, I’ll guide you on how to get there within a reasonable amount of time.
Give me a call at 250-826-3111, apply on my website or contact me through my online contact form to start the process today.
Let’s get your application off the ground.
