Lack of sufficient financial literacy can work against your financial success, especially when you don't understand what is helpful and what is detrimental to your creditworthiness. A large number of consumers believe some half-truths or absolute myths, and it is crucial we demystify some of them. So, let's check out the following myths and find out the truth. Afterward, you can use the information to build a remarkable credit score. The following are some of the most damaging myths that can hamper your financial well being.
Your score is not affected when you check your credit score with any of the online websites that offer your credit report and score. It doesn't matter which site you use; your score will not be affected by checking your credit. It only matters when you apply for a loan or line of credit. At this point, your credit ratings will be affected. However, a hard inquiry (when a lender is trying to determine whether or not to give you loan) on your report affects your credit score. Your new credit determines about 10% of your credit score. It may include new accounts and the total number of hard pull inquiries you have had within the past 12 months. Credit inquiries stay on your report for 24 months, but only those within the last 12 months count for your score. Having one or two queries cannot affect your score. But if you have more than two inquiries, it will automatically show you are looking for credit, and that perhaps you are experiencing financial constraints, which will lower your score.
About 40% of credit card users aren't aware that marital status isn't included on their credit reports. But the score of each partner does matter when you make joint purchases or apply for your loan together. In this case, both of you provide your own score; you don't just choose the higher score.
According to Trans Union report, 51 percent of credit card users believe utility payments always count in their credit score. The truth is that not all debt is reported to credit scoring companies. Some utility companies may report late payments or those that may have gone into collection, while others may forward both on-time and late payments. It's better that you play your cards safe and try to clear your outstanding bills as soon as possible, because the moment an unpaid bill goes into collection, meaning that your creditor sends the balance to a collection institution to clear payment, it can have a lasting and damaging effect on your credit score. Even small bills, like water bills, can affect your score if left unpaid.
If you are trying to find a job, it’s high time you stop worrying about your credit score, because an employer won't check it. Though they may look at your credit report, your score is not on your credit statement. Some employers do a credit check, but it depends on your job description. If your post has financial responsibilities, you are likely going to have a credit check. But in any case, a potential employer will ask for your permission first before looking at your credit report. About 34% of the public believe anyone can have access to their credit report and score, but these aren't public information. Your privacy is protected by the Fair Crediting Act, which limits access to your information to only those with legal needs. You can check your credit report through Boostcredit101 and ensure your statement is accurate, as well as work with them to improve your score. That way, you will be safe; even if a potential employer looks at it, you won't have to worry.
A credit card plays a useful role in helping you build a track record, but having a mix of credit cards and other kinds of loans, such as student loans, car loans, or mortgages, increases your score. Paying off different types of loans demonstrates financial acumen, and it improves your rating. It sends a clear message to the lender that you can correctly handle the type of credit they extend to you. Using your credit card responsibly will grow your credit score and also brighten your financial prospects.
To head in the right direction, you must find the correct information, embrace reality, and let go of the detrimental credit myths that are holding you back from achieving your financial success.