We all know how essential having a good credit score is for a secure financial life! People aspire to increase their credit score and, at times, are successful in their endeavours, too! However, sometimes believing in certain credit score myths may hinder your objective and create confusion.
While establishing a good credit score, gaining the right knowledge and eradicating common misconceptions about what affects your credit score is vital.
Here, we will discuss the most common credit score myths and help the borrower eliminate doubt or dilemma.
Common Myths About Credit Score
Here, we attempt to bust the most common myths about credit score.
1. A High Credit Score Means You Are Rich
A credit score is an essential three-digit number. It portrays your repayment ability and checks whether you are credit worthy. But is important to note that having a good credit score does not mean that you have a good bank balance too. Also, having a good salary does not indicate that you can have a great credit score. The credit card company offers a higher credit to the individuals having great credit. This keeps your credit utilization ratio low and credit score in good shape!
2. A Perfect Credit Score Does Not Exist
If you think that there is nothing like an ideal credit score, then you are mistaken. The people who are disciplined in making timely payments, pay in full, keep credit utilization low, have a healthy credit mix, and do not apply for new credit often can have a perfect credit score. So, you can join the elite 850 club.
3. Only Older People Need a Good Credit Score
Says who? Well, the minimum age for credit application is 18 years. So, it would help to consider maintaining a high credit score from this age. Experts believe that young people should build credit as soon as possible. This will keep their credit length long. It will also develop credit discipline, and you will have a habit of having a good credit score from the very beginning!
4. Clearing Debt Immediately Increases Credit Score
This statement is partially true. Paying off your credit card debt certainly improves your credit score, but paying off instalment debts does not. While we recommend that your financial life remain debt-free, you shouldn’t expect a spike in your credit score when you clear off your car loan. It can bring your score down as it will mean fewer credit accounts.
5. Your Credit Score Can Be Merged With Your Spouse
Your credit score has nothing to do with your spouse’s credit score. When you get married, your credit identity remains the same and your report is not merged with your spouse. The credit score is considered for the person applying for a loan. If there is a joint loan, then the credit score of both partners will be considered.
6. Closing a Credit Card Improves the Credit Score
As stated earlier, clearing debt does not increase credit score. Similarly, closing a credit card also never improves your credit score. It may decrease your credit score and shorten your credit length. It would be best if you do not cancel your credit card unless there is a specific reason or circumstances. Also, if your card is not charging a heavy fee, keep it open.
Wrapping Up
Due to lacking the right knowledge, people have no option but to believe in credit myths. Believing in these myths can be troublesome and lead to wrong financial decisions. Therefore, it is imperative to go through the compilation of the most common credit score myths above and acquaint yourself with the reality!
Disclaimer: This article provides a general guide to the subject matter. You should take a professional advice about your specific case.
FAQs
1. Can I get a perfect credit score and enter the 850 score club?
Ans. The people who make payments on time, keep their CUR or credit utilization low, have a healthy credit mix, and do not apply for new credit often can have a perfect credit score.
2. I am 18 years old. Should I consider building my credit score?
Ans. You should start building credit and maintaining a high credit score from this age. This will keep your credit length long and develop credit discipline.
3. Does clearing the debt push your credit score up?
Ans. While paying credit card debt improves your credit score, paying off installment debt brings your score slightly down temporarily.
4. I am getting married, and my spouse has a good credit score. Will this improve my credit score?
Ans. Your credit score will remain unchanged after the marriage. Your credit identity and credit report will not be merged with your spouse.