If you are considering buying a home, you have probably been doing some research about credit scores and credit reports. Your credit score will play a huge role in helping you get a loan for that home, so, at the very least, you don’t want to ignore it. If you’re trying to improve or maintain your score, you’ve probably heard a few rumors. We’re here to set the record straight. Here are five credit score myths, debunked:
- Closing out old credit cards can improve your score. The truth is that closing out old credit cards, especially if you have debt on the remaining ones, won’t improve your score. It could actually drag it down since it lowers your debt-to-credit ratio. Instead of closing those cards, take them out of your wallet and put them somewhere safe and just stop using them. You’ll keep the available credit on you report, but you won’t accrue any more debt on them.
- Factors beyond your credit history affect your score. Your credit score isn’t like your insurance rate. You age or sex won’t affect this number—neither will race. Your credit score is only calculated using your credit history.
- Checking your credit score can lower it. This myth is spurred on simply because there are some kinds of checks that can hurt your score. These are called “hard inquiries.” If you want to check your score using one of the big three agencies, you will not lower it (that’s called a soft inquiry). Even an outside party checking it will not lower it by much, and it’ll quickly recover.
- Paying off your debts clears away previous inability or unwillingness to pay. One of the biggest mistaken beliefs is that current positive financial behavior will erase previous negative behavior. Credit reports and scores just don’t work this way. Your report and your score take your previous history and your current behavior into account.
- If you pay your bills and don’t overuse your credit cards, you don’t need to check your score. One of the biggest reasons to check your credit score, especially before applying for something like a home loan, is because your report might have mistakes or evidence of fraud that can affect your score, even if you’re a poster child for paying on time.