Posted on: Oct. 17, 2017 in Credit

Understanding how credit works, the difference between your credit score and your credit history, how others can inquire about your credit, and all the jargon and terminology can get a person all turned around. To make matters worse, there’s enough misinformation out there that even a savvy consumer might be confused. Despite this, it’s pretty important to get a handle on things so that you know not only how to keep your credit in good shape, but also how the information will be used.


Here are five popular misconceptions about credit and the facts you need to set the record straight.

  1. If you don’t need credit right now, your credit doesn’t matter. News flash: Your credit always matters! Yes, it will be most important when you’re applying for a mortgage, credit card, or auto loan, but your credit score can also be checked when you’re applying for a job, renting an apartment, or buying an insurance policy. Keeping your credit history in tip-top shape means you won’t have to worry about it when you need it.
  2. Keeping a running balance will help your score. It’s easy to see how this myth started. Using credit is what helps keep your credit history current. Making your payments on time helps boost your score. Keeping your debt down also helps your score. But some people take this to mean they should carry a balance from month to month. Not only will you incur interest charges doing this, you’re not even helping your score! Use a card regularly, but pay it off in full every month if you can.
  3. Paying the minimum due on credit cards is enough. It isn’t. While you’ll avoid late fees and delinquencies by paying the minimum on time each month, you won’t pay off the debt very quickly. In fact, if you’re still using the card, you may even find the debt will grow.
  4. Demographic info impacts your score. Race, gender, marital status, and color are not factors in your credit score. Your salary, job title, and the amount in your bank account aren’t factors either.
  5. Checking your score hurts you. Nope, it doesn’t. When you check your own score, you’re taking proactive steps to help your credit. Hard inquiries, the kind where a lender checks your credit so it can make a decision about loaning you money, can hurt your score. Too many hard inquiries give the impression you’re desperate for money. Soft inquiries, on the other hand, don’t hurt your score. These are generally done as part of a background check for employment or an apartment.

The more you know about what does and doesn’t affect your credit score, the easier it will be to make the right decisions!

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