Credit Score Myths & Why U Should Monitor Your Score
Welcome back to the UMe blog, where we talked about credit score basics last week. Learning about credit scores and how they work is important because it can help U make better financial decisions. Having a greater understanding and using this knowledge can also improve your creditworthiness.
So this week we’re going to discuss the most widespread myths about credit scores.
Myth #1 Checking your own credit score will hurt it.
This is not true. When you check your own credit score, it’s considered a “soft inquiry” and does not have an impact on your credit score. Only “hard inquiries” made by lenders when you apply for credit can potentially lower your score.
UMe Pro Tip: If you check your credit often (A.K.A. a ‘soft pull’), keep in mind that it might differ slightly from the credit score that we pull for you (via hard inquiry). This is a common occurrence. That “soft inquiry” credit score you get is not a hard number, it can vary from what a financial institution pulls in doing a “hard inquiry” (which is a more detailed look at your credit history).
Myth #2 Income is a factor in determining your credit score.
This is not true. Your income is not included in your credit report or used in calculating your credit score. However, your income can indirectly affect your credit score if it impacts your ability to pay bills on time or manage your debts.
Myth #3 Closing credit accounts will improve your credit score.
This is not necessarily true. Closing a credit account can actually lower your credit score if it reduces your available credit or shortens your credit history. It’s generally better to keep credit accounts open and use them responsibly to build a positive credit history.
Myth #4 All credit scores are the same.
This is not true. There are several different credit scoring models used by lenders, with the FICO score (300 to 850) being the most widely used. Each scoring model may weigh factors differently, so your score may vary depending on the model used.
Myth #5 Only negative information is included in your credit report.
This is not true. Your credit report includes both positive and negative information, such as on-time payments, account balances, and credit limits. A mix of positive and negative information can help to establish a healthy credit history.
We, your friends at UMe, want U to have general knowledge about credit scores because paying attention to your score, and taking steps to improve it can open up good opportunities, like helping U to save money in the long run by providing access to better interest rates.
PAY ATTENTION AND CHECK YOUR SCORE REGULARLY
Monitoring your credit score is an important part of managing your financial health and can help U make better financial decisions, protect yourself against fraud, and access credit with better rates and terms. Keeping track of your credit score is important for several reasons, including:
- Spotting errors or fraud: Monitoring your credit score can help you spot errors in your credit report or potential fraud, such as unauthorized credit inquiries or accounts. Catching these issues early can help you take action to correct them and prevent further harm to your credit.
- Improving your credit: Monitoring your credit score can help you understand how your credit behaviors and actions impact your score. By tracking your progress and making adjustments, you can work to improve your credit and increase your chances of getting approved for credit or getting better rates and terms.
- Preparing for big financial decisions: If you are planning to apply for a loan or credit card, it’s a good idea to monitor your credit score ahead of time. This can help you understand what lenders may see when they review your credit and make any necessary improvements before applying.
- Early warning of financial trouble: A sudden drop in your credit score could be an early warning sign of financial trouble, such as missed payments or a significant increase in debt. By monitoring your score regularly, you can catch these issues early and take action to address them before they become bigger problems.
- Access to better rates and terms: A good credit score can help you access to credit with better rates and terms, which can save you money over time. By monitoring your score and taking steps to improve it, you can increase your chances of getting approved for credit with better rates and terms.
Understanding myths about credit scores and being diligent about paying attention to your credit score can help U take steps to improve it, which can open up more opportunities and — most importantly — save you money in the long run.
Have questions about how to plan your financial future? Drop us an email or give us a call today!
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