Your credit score plays a vital role in your financial health. It can impact your mortgage options and determine whether you can take out a loan or secure a credit card. Your score could even affect your living arrangements since many landlords use credit checks when evaluating a new tenant.
Unfortunately, there’s a lot of misinformation about credit scores — particularly what raises and lowers them.
Are you concerned about your credit score? Don’t believe these all-too-common myths:
Myth No. 1: Checking your score will hurt it.
A hard credit check will slightly reduce your score. Those generally only occur when you’re applying for a new loan or credit card. But pulling your annual credit report or checking your score through your bank is a soft check, and it won’t decrease your score.
Myth No. 2: Closing an account will help your score.
Your credit history — or how long you’ve had open accounts — plays a big part in your overall score. Because of this, closing a long-standing account can negatively impact your score, especially if you don’t have other long-term accounts in your name.
Myth No. 3: Small balances raise your credit score.
Your credit utilization rate matters: You don’t want to carry a large balance because that can lower your score. But even carrying a small balance when you could pay it off means you’re spending more on interest.
Myth No. 4: Your income influences your credit score.
Your credit score is only based on how you manage borrowed funds — things like credit cards and loans (including car, student, personal and mortgage loans).
Reach out to learn more about how your credit score impacts your options when buying a home.