Debunking Credit Score Myths and Tips to Improve Your Score
Understanding Credit Score Myths
There are many things to consider when it comes to credit, so it’s only normal to have misunderstandings on how to improve your credit score. To avoid confusion, here are some of the most common credit score myths that you should be aware of:
Credit Score Myth #1: You Only Have One Credit Score
A person can have many credit scores to their name, depending on several factors, such as the type of credit you’re applying for and the scoring model used. It’s possible that a lender will check a different score than what you’ve been looking up.
In fact, FICO has several methods of calculating one’s credit scores. The FICO Score 8 is the most common approach used nowadays.
It’s important to note that an auto loan will have a different scoring model than a credit card. With many factors affecting credit score, it can be difficult to pinpoint which scoring model a lender decides to use.
The good news is that these scores should only deviate minimally from one another. Unless there’s an error with the reporting, credit scores usually don’t have a difference of more than 50 points.
Credit Score Myth #2: All Credit Reports Provide the Same Details
As you know, the three primary credit bureaus are Equifax, Experian, and TransUnion. These three may sound like they provide the same data when sending reports, but they don’t.
The main reason for this is that creditors and lenders aren’t required to send reports to any of these bureaus or to all of them. For instance, a utility company might only send its reports to two of the three credit bureaus.
Additionally, these credit bureaus have their own algorithms for determining credit scores. That’s why you shouldn’t expect to see the same results across the different bureaus.
It’s always a good practice to ensure that your reports stay error-free, so you’ll be confident with the information they get no matter which credit report is pulled.
Credit Score Myth #3: Pulling Up Your Credit Report Will Reduce Your Score
Many people believe requesting a credit report will negatively impact your standing, but that’s not true. Staying updated on your credit is crucial as it lets you notice errors and resolve them quickly.
As stated earlier, checking your own report will result in a soft inquiry — not a hard one. These soft inquiries don’t show up on reports or affect your scores.
Credit Score Myth #4: Your Education Level Affects Your Credit Score
Credit bureaus don’t look into demographic information when determining credit scores. It doesn’t matter if you’re just a high school graduate or you have a diploma from a prestigious university; neither will change your standing.
Creditors and lenders are interested in your ability to pay them back on time. That said, your payment history significantly allows credit bureaus to assign a credit score for you.
Credit Score Myth #5: Married Couples Get Joint Credit Reports
Regarding your credit history, there’s no such thing as a joint account. Each person has their own credit history attached to their identity, and it’s unique to every individual. Even if you use the same credit cards or file joint taxes, the data will be reported separately regarding credit reports.
For example, you and your spouse will still get separate credit histories even if you opened a joint loan or credit card. Make sure to still pay on time to avoid harming your credit scores.
Credit Score Myth #6: Filing For Divorce Will Affect Your Credit Score
A divorce doesn’t have an effect on your credit score. However, missing payments due to a divorce will still negatively impact. In most instances, any loan or debt you’ve signed during a marriage is your and your partner’s responsibility.
It’s common for one side to take ownership of a joint account, which is why you should work to have your name removed if you’re no longer together. This is because any late or missed payments will still reflect on your credit score even if your spouse takes over your account.
Credit Score Myth #7: A Good Job Means a Better Credit Score
Your job and how much you make do not directly impact your credit score. This is because credit bureaus primarily look at the information in your credit report to determine your standing.
Your report has many details available, but your income isn’t one of them. It may not even reflect your current job.
However, your employment situation can still affect your score since it changes your ability to pay any debts you have at the moment.
Credit Score Myth #8: A Good Credit Score Is Hard To Achieve
Being in debt isn’t a requirement to build up good credit standing. Owning a credit card and ensuring you make payments on time are sufficient.
Another way to increase your credit score is to see if your utility company can report your payments. You can also register for a rent reporting service to have a higher chance of improving your scores.
Being patient is essential if you want to know how to improve your credit score. Building credit doesn’t happen instantly. Typically, it can take one to two years of maintaining a good credit history before you can see positive changes.
Conclusion: Navigating Through Credit Score Myths
Earning the ideal credit score is essential if you want to take advantage of better rates and services. However, those with a bad record can still make positive changes to improve their standings.
Making payments on time is still one of the best ways to have a good reputation with credit bureaus. By following the tips provided above, you should already have a good idea of how to improve your credit score.
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