There are plenty of things to worry about when it comes to your finances. Don’t let credit score become another stressor. It can be difficult to tell what’s the truth and what’s not when it comes to credit score. Will your credit take a hit if you open a new account? Does a potential employer check your credit score? In this blog post, we’ll debunk some of the most common myths about credit.
Myth 1: There’s Only One Credit Score
You may actually have many credit scores, depending on several factors. In fact, the credit score that you check might be different from the one that a lender checks.
FICOⓇ has several ways to calculate a credit score, with FICOⓇ Score 8 being the most common method.
The type of scoring model used depends on the type of credit you’re applying for such as a credit card versus a home loan. You won’t know exactly which scoring model is used, since there are hundreds of variations that could affect your score.
Generally speaking, however, your credit score is calculated, they will be relatively close to each other. They may differ a little bit, but usually by no more than 50 points. You can help ensure your credit score is as high as possible by keeping your credit report free of errors, negative marks, and excessive debt.
Myth 2: Checking Your Credit Score Will Hurt Your Credit
Nope. Checking your own score is considered a “soft” credit pull, which means it won’t damage your score- at all. Now, if you “inquire” about your credit score when you apply for a loan or a credit card, your score might fall because that application suggests you’ll be adding debt. But, if you simply look at your own credit report, your score is unaffected and you’re being a responsible adult.
Myth 3: Closing a Credit Card Will Help Your Score
If you have a credit card you don’t use, you’re unlikely to improve your score by closing the account. In fact, closing the card might even lower your score. Generally, credit scoring models don’t measure risk by how much credit you have available, but rather by how much of that credit you’re using. This ratio is known as “credit utilization”. So, when you close an unused account, you reduce your total available credit and your credit utilization goes up.
Myth 4: The Amount of Money You Make and Have in the Bank Influences Your Score
Your income and bank bala