10 Credit Score Myths You Need to Reconsider
There is so much misinformation when it comes to credit scores. This is surprising, considering how common credit cards have become. A credit score is used by lenders to determine your likelihood of paying them back. Specific criteria are used to assess a borrower’s general risk. This includes the amount of debt a borrower already has and payment history.
FICO and other credit scoring companies don’t hide the type of information that they use to calculate credit scores. However, there is still a lot of speculation.
So take a look at some of the most common myths about credit scores.
Large Balances Are Good for Your Credit Score
Some myths are so widespread and believable because there is some truth in them. And this is one of those myths. Using credit can help boost your credit score.
Carrying a large balance, however, could hurt your credit score.
Your credit card debt accounts for 30% of your credit score. This is according to FICO. So high credit card balances are not good for your credit score. Experian recommends using less than 30% of the total available credit and the individual card limit. If you go above that level, your score will start going down.
Your Credit Score Increases When Your Income Increases
It is easy to believe this myth because most wealthy people have high credit scores. But your income doesn’t affect your credit score.
According to FICO, the five components that count include credit mix, new credit, length of credit history, amounts owed and payment history.
Income is not used in calculating your credit score. It is just that people with high incomes tend to have enough money to pay off their debt. This boosts their credit score.
If You Get Married You Will Have a Joint Credit Score
Couples can choose to combine their finances when they get married. If you are not sure about merging your score with that of your partner, you have nothing to worry about. Joint credit scores don’t exist.
Everyone gets to keep their individual credit history. Any joint accounts that you open with your partner will appear on your report. But…
