How Credit Scoring Really Works: 6 Myths About Bad Credit

Are you worried that your actions might be impacting your credit score? Many people follow advice they find online, but the information they read isn’t always incorrect. Instead …

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Are you worried that your actions might be impacting your credit score? Many people follow advice they find online, but the information they read isn’t always incorrect. Instead of improving the score, they end up making the situation even worse.

A common misconception is to believe that by closing credit cards or having a large savings account, you’ll instantly have a better credit score, but that’s not the case. It’s also wrong to assume you can’t get a loan with a bad score or that married couples have their credit scores merged together. Read on to learn more about six credit myths.

Closing a Credit Card Increases Your Score

There’s no point in closing credit card accounts, especially if they are in good standing. After all, this might hurt your score. One big factor is the debt-to-credit ratio and how it changes over time. By closing one or more cards, you’ll effectively change the ratio, seeing a sharp drop in your credit score.

Checking Your Own Credit Affects the Score

Checking your own credit is called a “soft inquiry,” and it doesn’t impact the score. In fact, you should do it regularly to ensure there’s nothing out of the ordinary. However, if a lender checks your credit, it’s called a “hard inquiry,” and there’s indeed a small drop in your score.

Credit Scores Merge When People Get Married

If you’re having second thoughts about marrying your partner because your credit scores will be merged, don’t worry. Each of you will keep your own credit scores. Unless you apply for a loan together, when both scores would receive an inquiry, there’s nothing to be concerned about.

You Can’t Get Loans or Merchant Accounts With a Bad Score

Lenders and creditors take many factors into consideration, but a bad credit score is just one of them. Many companies will look at your application as a whole and take you as a client depending on your income, level of debt, and other circumstances.

Big Savings Means You Have a Good Credit Score

The amount of money you have in your bank account has no influence on your credit score. While good savers tend to have better credit, it’s also possible to have a lot of money and a bad score. Make sure you use the cash to pay your bills on time and slowly increase your credit score.

It Takes Forever to Improve a Bad Credit Score

Although it might take several years for the negative information in your credit score to go away, it’s possible to improve your score before that. If you maintain a reasonable level of debt by making timely payments, you might see a positive change sooner rather than later.

Everybody knows the importance of a good credit score, but getting there is not always straightforward. Once you learn more about the subject, you can take the right steps to improve yours. Even if you have a bad score, it’s nice to know you may still be able to access financial products and services.

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