Debunking Bad Credit Myths
Credit cards and building credit are extremely important aspects of your financial health, unfortunately there is plenty of misinformation around that in many cases can do lots of harm. Below you will find several myths about credit debunked. Hopefully this will help you use credit wisely and avoid the many pitfalls that bad credit habits can have on a person.
In order to build good credit you need lots of loans and credit cards- False
Many people believe that building a good credit rating means that they have to borrow lots of money and quickly pay it off. This is false and in many ways harmful. While you do need to establish credit and have a loan or one or two credit cards in order to do so, you do not have to splurge using your credit cards in order to build your credit score. Using your cards responsibly should be most important to you. Credit takes a long time to build and there are no shortcuts. When building credit be responsible and only use credit cards as a last resort or convenience when you are purchasing items that you have the money for.
Checking your credit score can lower it- False
You will not lower your credit score by checking it each year, every six months or whenever you like. However, make sure you check it through one or all of the big three reporting services. There are many services that are not affiliated with the big three and can be scams.
If you make a higher income, your score will increase- False
It is important to note that even if you are making a million dollars a year and are late on your payments, your score will suffer. While an increase in income can help you when creditors figure out your debt to income ratio, if you are late on payments or default on loans, your score will continue to suffer.
Age, Sex and Race can affect a credit score- False
Age, sex and race are not taken into account when figuring out a credit score. The things taken into account are your income, the loans you have outstanding, the amount outstanding and past performance when paying off your debts (among other things).
