You probably know that protecting your credit is important,but you may not know whether some of what you hear about credit is myth orfact. Misinformation might cause you to make the wrong decisions about money and credit. Here are some things you may have heard about credit that are actually myths:
Myth Number 1: Everyone Has a Credit Score
You need at least one credit card or loan to have a credit score. If you’ve never applied for credit, you don’t have a credit history. If your credit accounts are brand new, they may not have been reported yet. It might seem like it’s a good idea to pay cash for everything so that you don’t get into debt, but not having a credit score at all can hurt you. If you’re“credit invisible” it may be difficult for you to get a loan, and it may also hurt your employment options or your ability to get an apartment.
Myth Number 2: You Need a Good Job or High Income to Have Good Credit
Your credit has nothing to do with what you do for a living or how much you make. Your credit score is based on a combination of factors such as payment history, credit utilization, credit mix, and length of your credit history.
Myth Number 3: It Takes a Long Time to End up with a Bad Credit Score
Making a mistake such as forgetting to make a payment can have an impact on your score right away. Other factors can also cause your score to drop, such as maxing out your available credit or applying for too many new accounts.
Myth Number 4: You Have Only One Credit Score
You may actually have several credit scores because depending on what type of credit you’re applying for, different scoring models may be used. Your credit scores are usually close to each other but may differ slightly. Big differences between credit scores may mean there’s an error on one of your credit reports that should be investigated.
Myth Number 5: Paying Off Past Due Accounts Fixes Your Credit
Paying off old bills just makes them show as “paid” on your credit report but doesn’t completely fix your credit. Negative records such as accounts paid more than 30 days late or accounts that ended up in collections stay on your credit report for up to seven years.
Myth Number 6: You Have to Get into Debt to Build Credit
Having a credit card doesn’t mean you have to get into debt.To have a great score, use a credit card to pay for a small expense and pay it back in full every month. This shows potential lenders that you pay your bills,and when you pay the full balance each month, you can avoid paying interest.
These are just a few of the myths that you may have heard involving credit. Be sure to do whatever you can to keep your credit reports free of errors. Dovly offers credit education as well as credit monitoring and improvement services. Let us help you work toward a brighter financial future starting now.