|7 CREDIT MYTHS BUSTED|
|Posted on: Feb. 20, 2017 in Credit, Credit Score, Debt|
There’s plenty of misinformation out there about credit. People hear something, share it with others, and soon, these myths become so widespread that they are often taken as fact. The key to a better credit score and the opportunities that come with it is to understand credit and credit scores. Here are some popular misconceptions about credit and the real truth to go with it.
Myth #1: Having money helps your credit.
Fact: Your credit score is based on how you borrow money, pay it back, and use credit. How much money you have in the bank or stuffed into the mattress makes no difference at all.
Myth #2: Paying cash keeps you out of credit trouble.
Fact: This one is murky. Here’s why. If you only ever pay cash, you won’t accumulate debt. That means that your credit score won’t be lowered because of outstanding loans, late payments, or other debt related factors. However, your score will be quite low, however, because you’ll have no credit history for anyone to base your credit-worthiness on. It’s better to use credit wisely than to not use it at all.
Myth #3: A debit card is the same as a credit card.
Fact: No, sorry. A debit card just lets you access your own money (see Myth #1 above). It looks like a credit card, but there’s no borrowing involved. Therefore, no credit. It will neither hurt nor help your credit score (unless it’s all you have, then see Myth #2 above).
Myth #4: Checking your credit report hurts your credit.
Fact: When you check your own score, your score is not impacted. However, when lender’s check your credit because you’ve applied for a loan, credit card, or store credit account, this is called a “hard inquiry” and it can impact your score. It’s not often a big hit, but if you’re concerned about a low score, be careful.
Myth #5: Utility bill payments won’t affect your credit score.
Fact: Your phone bill, electric, internet, cell phone... these can all be reported on your credit history if you make late payments. If you are sent to collections on a bill, there’s a very good chance it’s negatively impacting your credit score. All your bills need to be paid on time to avoid negatives on your credit score.
Myth #6: You can close old credit accounts you’re no longer using to help your score.
Fact: Closing a credit account can hurt your score. Part of your credit score is based on how much of your available credit you’re using. So, if you close a card that has no balance, you’re eliminating that available credit that’s making you look better!
Myth #7: If you have bad credit, you can’t get a car loan.
Fact: There are programs specifically designed to help people with bad credit get the loans they need to buy a car. These programs look at other factors such as your monthly income and your employment history in addition to your credit score to give them a better picture of your situation.
If you’re ready for a new car but your credit is keeping you from getting approved, CreditYes can help with our bad credit auto loan program! We can match you with a dealership in your area that will be with you ever step of the way. Our service is fast and free. Fill out our secure online application and get behind the wheel of your next car today!