Credit Myths Demystified
Credit score myths and misconceptions often cloud the truth about managing your credit. Understanding your credit score is crucial for managing your financial health. In this article, we break down common credit score myths to help you make informed decisions, improve your credit, and avoid costly mistakes.
Myth #1: “Having a credit card means you’ll end up in debt.”
Truth: Using credit cards responsibly can help you avoid interest and debt. Many of us have heard stories of people struggling with credit card debt or have been told many times that credit cards are “bad” so they assume using a credit card always leads to financial trouble. While they can be misused, proper management of a credit card can actually improve your financial wellness.
Myth #2: “Checking your own credit score hurts your score.”
Truth: Checking your own score is considered a “soft inquiry” and does not impact your credit. Confusion often arises because “hard inquiries” by lenders, landlords, or other entities, can lower scores slightly. Fortunately, you can review your credit score any time without negatively affecting your credit! And Main Street Bank offers a free and easy tool that makes checking your credit score effortless.
Myth #3: “Closing old credit cards will improve your credit score.”
Truth: Closing credit cards may reduce your credit score by lowering your available credit and shortening your credit history. Lowering your available credit by closing old or unused credit cards tips the scale towards more credit utilization, which can discourage credit card providers from approving credit applications.
Myth #4: “Paying bills late by a few days won’t impact your score.”
Truth: While minor delays might not be reported immediately, late payments can seriously damage your credit. Some people believe only major missed payments matter and underestimate the impact of smaller lapses. In addition to damaging your credit score, late payments often have other negative impacts, such as owed interest. It is always best practice to pay off your credit cards promptly and avoid any missed payments.
Myth #5: “You only have one credit score.”
Truth: Several scoring models exist, such as FICO and VantageScore, so an individual’s credit score may differ depending on the source. The term “credit score” is often used in the singular form, which can lead to the impression that only one number represents a person’s creditworthiness.
By separating fact from fiction, you can confidently build and maintain a strong credit profile. Explore these insights and take control of your financial future with Main Street Bank’s trusted resources and credit card solutions.