Credit scores are an all-important facet of personal finance health. Yet these scores are also plagued by misinformation. Credit scores are measured from 300 to 850. Anything below 629 is considered “bad,” while anything above 720 is “excellent.” A poor credit score could result in higher interest rates on debt, and could even render you ineligible for things like mortgages. Here is a breakdown of the biggest credit score myths and how to avoid them.
CHECKING YOUR OWN CREDIT REPORT WILL HURT YOUR SCORE
Many people believe that checking your own credit report will drop your score. While you should be cautious of credit checks that count as hard inquiries, looking at your own credit report has no impact on your credit score. You can pull your credit report for free at annualcreditreport.com
LEAVING A BALANCE ON YOUR CREDIT CARD WILL INCREASE YOUR SCORE
Carrying a balance on your credit card from month to month can accrue interest fees. A rule of thumb for revolving debt is to keep your balances below 30% of your available credit. The best practice is to pay off your balance in full each month so y ou can avoid feels and to keep your utilization low.
YOU ONLY HAVE ONE CREDIT SCORE
There are three major credit reporting agencies: Experian, Equifax and Transunion. Each has different data on your credit activity, which is why each one may report a different score.
YOUR INCOME IMPACTS YOUR CREDIT SCORE
While your income may impact your approval for certain loans, it’s not a factor of your credit score. Your credit score consists of 5 factors: payment history, credit utilization, length of credit history, new credit, and types of credit you have.
WHEN YOU GET MARRIED, YOU SHARE A CREDIT SCORE WITH YOUR HUSBAND
Getting married doesn’t automatically combine your credit scores. Each person will continue to have their own score based on their own financial history. However, if a couple does open joint credit cards, co-signs for a loan, or adds the other as an authorized user, that will impact both credit reports.
