Many of the things people “know” about credit scores and credit reports have as much validity and truth to it as the Easter Bunny or Santa Claus. The things that really do have an impact in your personal finances are those that you may, or may not; know about your credit score. This triple-digit representation of your credit worth may seem pretty easy, but credit scores aren’t always intuitive.
From paying off your debts, applying for car financing even with bad credit, to cancelling credit cards, here are some of the top credit score myths and the facts that disprove them.
Paying All Debts will Clear Your Credit Report
Your credit report details the history of your payments. It gives you the whole picture, not just a snapshot of your current situation. Even if you pay off all your debts right now, your credit report will still reflect your past transactions.
Applying for Another Loan will Hurt You More
Not really. Whether your credit score improves or further dwindles down to oblivion, it’s all up to you. Applying for loans can actually be good for you, provided you do better with your finances this time. Say you apply for a bad credit car loan with Bluesky Auto Finance, your credit score with Experian, Equifax, or TransUnion can actually improve if you do well with payments this time.
The More Money You Earn, the Higher Your Credit Score Will Be
Your income has little or nothing to do with your credit report or credit score. Remember, your report is about your ability to pay bills on time; it’s not a report about your wealth. Even if you have a ton of money, your credit report can still end up being bad if you can’t pay your bills on time for whatever reason.
Cash-Only Transactions will Help Boost Your Credit Score
For you to have good credit, you have to use credit, and responsibly at that. The report takes a look into how you pay your debts. If you don’t have a credit card, credit bureaus will look into your loans and other mechanisms in gauging your ability to repay debt.
They say knowledge is power, and rightfully so. When it comes to managing your finances, nothing is more important than being informed and knowing what to do.