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3 Credit Myths You Cannot Afford to Believe

shutterstock_524866156Most people have a basic understanding of how their credit score works. They know that in order to qualify for large loans, they need to have good credit. For the most part, they understand that things, like avoiding excessive debt and paying their bills on time, will help to improve their credit score. However, there are a few credit myths out there that could hurt your credit if you fall for them. The following are three major credit myths that you should not believe:

1. Closing your old accounts will benefit your credit score

If you’ve been diligently working on paying off an old credit card, don’t close the account once you’ve paid that credit card off. Some people may think that closing a credit card account will not only help improve their credit score but help to keep them from using it.

However, closing a credit card account will reduce the amount of available credit that you have, which in turn will make your credit utilization ratio higher. For example, say you have two credit cards with a $1,000 limit on both. They both have a $500 balance. This means that you have a 50 percent utilization ratio. If you pay one off one of these credit cards, then your credit utilization ratio will be 25 percent. However, if that account is closed, then you take away $1,000 in credit. This means that your credit utilization ratio doubles, going back to 50 percent.

2. Checking your credit score too often will hurt your credit

If your credit is checked too many times, it could hurt your score. However, there are two types of credit checks – hard credit checks and soft credit checks. A hard check occurs when you apply for a new credit card. When this happens too often, it can indeed hurt your score.

However, a soft check is when you check your own score. Pre-screening credit checks and checks performed by existing creditors are also considered soft checks. These do not affect your score. It’s important to know this as checking your own credit score regularly can help you keep better track of your credit.

3. Credit card debt is bad no matter what

Having too much credit card debt is bad; however, a small amount of credit card debt can actually improve your credit score. Most experts believe that you should have a credit utilization ratio that’s below 30 percent for a good credit score. Having a 15 percent credit utilization ratio is, therefore, a good thing, but having zero credit utilization can be a bad thing. It makes it difficult for lenders to determine whether you’re financially responsible if you’re not using any credit at all.

As you know, maintaining a good credit score is extremely important if you ever plan on qualifying for a large loan or for more credit. To maintain a strong credit score, make sure that you don’t fall for any of these three major credit myths.

If you have fallen into one of these myths and find yourself struggling to get out, BoostMyScore can help.  We have a discovered a way to add poistive history to your credit report.  We do this by adding you as an authorize user to existing credit card accounts that have a long, perfect payment history, high credit limit, and little or no balance.  When  we add you to an authorized user on a strong tradeline, the credit card company reports the entire history to your credit report drastically and immediately improving your credit score.  Not all tradelines and company’s that supply tradelines are created equal so be sure to check out the company that will help you select the tradelines that will help you accomplish your goals.

Bill Airy

About the Author:

Bill Airy is the CEO and Founder of BoostMyScore. For over 12 years he has helped American consumers get a second chance at a better financial life by helping them to improve their credit score. He regularly publishes helpful content on this Blog to educate others about Credit Scores and best practices when trying to improve them.

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