If you’re looking to buy a car or a house, one very important number could be standing in your way: your credit score. The interest rate you’ll pay for the money you need to borrow is determined by this number and the lower your scores, the higher the interest rates you will pay. Once you lose your good credit standing it is difficult to get back, so to determine what will or will not damage your credit scores, here is a list of credit myths put to the test:
Requesting a copy of my credit report won’t hurt my score. TRUE. Obtaining a copy of your credit report annually is a great way to check for inaccuracies and monitor identity theft, such as fraudulent accounts opened in your name. Repeated inquiries from outside sources like credit card companies and car dealerships, however, can drastically decrease your score. Your FICO score ranges from 300-850, however, most Americans’ scores fall between 600 and 800. You can obtain a free credit report each year from www.AnnualCreditReport.com.
One or two late payments won’t hurt my score. FALSE. One late payment can negatively impact your score significantly. Paying your bills late or not making them at all can increase your interest rates and affect your ability to qualify for other loans. While several late payments are more damaging than one, be safe and never miss your due date.
Having different types of credit is good because it shows I can handle my obligations. TRUE. Lenders like to see a mix of installment loans, such as student and auto loans, along with credit cards and store accounts. It proves you can manage a variety of credit responsibly.
Maxing out my credit cards won’t hurt my credit score if I make payments on time. FALSE. To creditors, maxing out your cards is a red flag, signalling you may be at the end of your financial rope. Always try to keep your outstanding credit balances below 30% of your limit.
