Credit Score Misconceptions
When you start learning about your credit scores, it’s easy to get paranoid about the numbers. But, there are a lot of myths about actions that will affect your credit rating, whether negatively or positively. A few actions that you do not need to be worried about:
Pulling Your Own Credit
When you check your own credit, this is known as a “soft pull.” “Hard pulls” are what occur when a bank or another organization looks at your credit reports with the intent of granting you a new loan. Because each new loan we get can increase the exposure of other creditors, having recent hard pulls will have a short-term, but minor, negative effect. But, looking at your credit yourself does not count against you. In fact, looking at your own records frequently can help you identify errors and problems, leading to a higher credit score overall.
Visiting a Credit Counselor
Many people who are struggling with bad credit are afraid to visit a credit counselor because they fear it may add another ding to their credit. But, the counseling itself is never recorded on your credit record in any way.
If you are shopping for a mortgage, creditors expect to see several pulls within a short period of time. All this indicates is that you are comparing offers, and it will generally be considered a single inquiry. If you are looking at new and different credit offers every few months, on the other hand, it can look like you are at risk of overextending yourself. Recent credit inquiries only make up about 10% of your score, so, even if an inquiry brings your score down, the effect is minimal and temporary.
Carrying a Balance on Your Cards
Many people believe that they need to carry a small balance month to month on their cards to improve their credit scores. This is not the case at all; carrying a small balance just results in paying interest. Other people feel that any balance at all can hurt your rating. However, a balance between 10 and 30 percent of your available credit is considered in the healthy zone and will not harm your score.
Not Using Your Cards
Many people believe that you need to use all cards regularly for them to count toward your credit score. While a card company may close a credit line that hasn’t been used in a long time, you don’t need to keep a card in constant use. Charging items a few times a year and paying in full is sufficient to keep a card active. We recommend setting up automatic charges and payments on infrequently used cards only to simplify the process of keeping them in use.
Knowing what can and can’t hurt your score gives you a leg up in the credit game. Educate yourself and keep an eye on your records to keep your score high and get access to the best financial opportunities.