A credit score is one of the most important numbers in your financial life. This can impact everything from the interest rate you get on a loan to whether or not your new credit card is approved. But despite its importance, there are still many myths and misconceptions about credit scores. In this article, we’ll debunk some of the most common myths and help you understand what really affects your credit score.
Borrowing less means a better score
One of the most common credit score myths is that you can improve your score by borrowing less money. That’s not true – your credit score is actually based on how much you owe compared to your available credit. By making payments on debts like personal loans or credit cards, you build your score because you prove you can borrow money responsibly and pay it back on time. However, if you don’t borrow anything at all, you won’t have a credit score. There are credit cards specifically designed to help people build their credit.
Your score is affected by your spouse
Another common myth is that your credit score is based on your spouse’s credit score. It’s not true – your credit score is based on your own financial history and behavior. No matter how bad their score is, it won’t affect you. However, if you try to take out a solidarity loan of any kind, both scores will count in this case.
You will never get a loan with bad credit
Many people think that if they have bad credit, they won’t be able to get a loan at all. That’s not true – you may just have to pay a higher interest rate. Lenders consider your credit score as an indication of the risk involved in lending you money. The lower your score, the higher the interest rate is likely to be. But many lenders offer personal loans for bad credit and these are actually a very effective way to increase your score again. By taking out a small loan and paying it back on time, you can begin to rebuild your credit. So, even though it will be more difficult, you can still get a loan with bad credit.
Your address may be blacklisted
People often worry about taking over the poor credit rating of the person who lived in their home before them. There is a common myth that an address can be blacklisted and anyone who lives there will automatically have their credit rating lowered. It’s just not true. Your address is in no way linked to your credit score – it is a personal record based on your financial habits And nothing more. So, it doesn’t matter if the previous occupant went bankrupt 5 times, it doesn’t affect you at all.
If you want to maintain good financial health, it’s important that you stop believing these common myths about your credit score and how it affects you.