4 of the Biggest Credit Score Myths

Having a great credit score will reward you with the best interest rates and terms that are available in mortgages, credit cards, and loans, savings not only hundreds each month, but thousands over the life of the repayment plan.  Unfortunately, those with lower credit scores will be at the lender’s mercy, so why not improve your score to the best of your ability.  Each year you are entitled to a free copy of your credit report, which you should review for inaccuracies that could be affecting you overall.  The score will be an extra charge, but with most lenders including on monthly credit card statements, you are able to see your current FICO score, even clickable on online accounts.  There is always room for improvement, so make sure you are not falling for the most popular credit score myths. Those that do are often in need of credit repair, which is another situation altogether.

Having a Balance Helps My Score

You may think that having a balance will show creditors that you are responsible, but that is definitely false.  Making on-time full statement balance payments will mean more than carrying a balance, especially to back off from your total credit availability, as you want to be furthest from your credit limit as you can.  Having a zero balance is what you should strive for.

I Should Close Old Credit Accounts

To some, the responsible thing to do with old credit accounts that you are no longer using would be to close the accounts, but actually that is doing more damage than good.  Closing an account will reduce the total credit available that you have, so if you have other accounts with a balance, it will actually lower your score now.  Also, length of time the account is open is important too.

Credit Cards Are Unnecessary

I have heard from some that say that credit cards are unnecessary, but you need to build a credit history from somewhere, showing lenders that you can make charges and pay off responsibly.

Making the Minimum Payments Are Enough

Sure on-time payments are important but you will not score any extra points with your credit score by only making the minimum payments each month.  The only one you are hurting is yourself, as the balance continues to carry over, collecting interest that you will be responsible for, sinking deeper into debt.  Whatever you charge, pay off the entire statement balance when it is due.

 

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