CREDIT SCORE MYTHS BUSTED

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Introduction:

Credit Scores are the reasons why a lot of people do not get a good night’s sleep. In today’s world, where information is becoming more and more available at ease to everyone, a good credit score has become a mandatory requirement to lead a good lifestyle. However, there are so many myths surrounding this oft feared word. It is said that it is always better to be ill-informed than misinformed. Hence, in this article we shall discuss what are the common misconceptions associated with credit scores, how to assess them and how to debunk them.

Also read: Important Things You Need To Do To Get Your Credit In Good Shape

Common myths surrounding credit scores:

“You need a good bank balance to obtain a good credit score”- False

This is totally untrue. Your credit score depends on how promptly you pay your bills and not on your account balance. Even if you do have balance, yet default on your payments, it will definitely reflect badly on your credit score.

“When you marry, your credit score improves because it merges with your spouse’s score”- Totally false

If you have been assuming the above, then you need to wake up and come to terms with reality. Marriage has nothing to do with your credit score, whatsoever.

“When you marry, your credit score improves because it merges with your spouse’s score”- Totally false

If you have been assuming the above, then you need to wake up and come to terms with reality. Marriage has nothing to do with your credit score, whatsoever.

“Employers go through your credit scores”- False

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It is legally not possible to obtain financial records or details of any individual without their approval. Also, it is totally legal to deny if your employer asks for the same.

Also read: An Overview Of Good Credit Score

“Closing a credit card will improve your credit score”- False

This will rather hurt your score than help it in any way. If your card has a balance and you plan to close it, then please stop. It will reflect adversely on your score and the ramifications will remain for a long time.

“Using Credit Utilization Ratios to your benefit will improve your score”- True

It is also advisable to not max out your credit card. Maxing out tends to result in adverse scores. Always keep your credit cards under 25% utilization. It is a myth to think that your credit scores won’t get affected just because you are not late on payment. Best practice is to maintain a good credit debit mixture and never exceed the same.

“Keeping a mixture of Credit Account Types will improve your score”- True

There are 4 types of credit accounts. They are real estate loan, installment loan, credit card and retail loan. It is always best to keep a mixture of all these credit account types. The hierarchy of impact that these loans cause to your credit score is as follows: real estate loan, installment loan, credit card and retail loan. As per this hierarchy, try to maintain an ideal mix to maintain an ideal credit score.

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