3 Myths About Your Credit Score Debunked

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Wallet with lots of credit cards.

Having too many credit cards may or may not be good for you. It depends on how you use them.

Lately, I’ve been compulsively checking my credit score. I needed a new apartment, I’m applying for loan consolidation, and I’ve been looking into getting a credit card. I wanted to know if these applications impacted my score.

Then, I was on the phone with my mother recounting my obsessive rituals—and she yelled at me: “You can’t do that!! It will RUIN your credit score. Every time you check your credit it goes down!!!”

Well that’s no fair … and it turns out, not true.

***

After doing some research, I learned about some other credit score myths floating around out there. Here are three of them that you can stop (or start) worrying about.

Myth #1. Checking Your Score Makes It Go Down

After talking to my mother, I turned to my favorite financial adviser: Google. It taught me that there are hard credit checks and soft credit checks. When you check your own credit, that’s a soft check, which doesn’t impact your credit. However, when you request that another party check your credit, as part of an application to receive a new line of credit, that’s a hard check—and it will probably have an impact.

I also learned something cool from my manager at work, while whining about this unfortunate fact. If you apply for the same thing a bunch of times within the same 30-day period—e.g., car loan, apartment lease—it usually won’t impact your credit. The credit bureaus assume you’re shopping around for something, so they give you a pass. How nice of them.

Myth #2. You Should Never Close A Credit Account

I always ignored this crazy piece of advice, mainly because I’ve never had a credit card. Now that I’m looking to get one, I want to know what I’m getting into.

After reading Ashley’s post on the mystery behind your credit score, I better understand how this myth came to be. Your score takes into account the length of your credit history. The longer you’ve had an account, the better. So, closing out your oldest card hurts you, right? Not so fast.

Your score also takes into account how long it’s been since you’ve used your accounts. So, if your credit card is just gathering dust in your wallet, that’s no good either (besides maybe helping your debt-to-credit ratio—another thing your score looks at. Seriously, just read Ashley’s post).

Based on all this, I think the actual advice should be to use any line of credit you have open. Even if you just put a small, recurring charge on it, like a Netflix subscription, that will ultimately help you.

Myth #3. Student Debt Has Nothing To Do With Your Credit

When I first took out a student loan, I was assured that student loans have nothing to do with my credit. This is not true … at all.

On the bright side, your payment history with your student loans is included in your credit history. Make on-time payments every month, and you can boost your credit history. I was pleasantly surprised when I checked my score to find out that I had three years of on time payments under my belt.

The less bright side? Well, while the amount of student loans you have doesn’t impact your score, it does affect your debt-to-income ratio, which creditors will likely look at when determining whether or not to issue you a loan. In addition, if you don’t make your payments, that can seriously hurt your credit score—especially if you end up in default.

If you’re in that situation, don’t worry. Call your loan holder and ask about postponement options. These will allow you to take a temporary break while not hurting your score.

Have you heard a credit myth that wasn’t true? Share it below!

(Photo: Wikimedia)

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