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7 Myths about your credit that really won't hurt your standing

"The biggest mistake you could make that can shut your credit down!"

"Nine credit misconceptions that are costing you your credit score"

Much of the news in the financial websites nowadays talk about how one's lack of knowledge when it comes to credit ratings. With the number of things we need to look out for, the world seems like a cramped space where a single move can cause you everything. This article debunks some of these myths to help you breathe again.

p style="text-align: justify;">It is important to note that finding out that you were mistaken doesn't need to be a negative thing. By understanding that these things are actually untrue, it gives you more flexibility to make some actions and decisions without being afraid of its impact on your score.

1.   Closing down your oldest credit card account shortens your history

Rather one of the most common myths when it comes to your credit scores, closing down your old account won't necessarily lower your credit score. The myth says that doing so will reduce credit history, which could potentially disregard any good behaviour you have with the account. This is untrue; as a matter of fact, accounts that are closed with good standing do stay in the credit report even longer than entries that aren't so great - as much as 10 years from the date the account was closed. Therefore, the closed account still has an impact on your credit score.

What you should take note though, is that if you are currently carrying debt - be it a loan or outstanding balance on another card, closing down another account increases your credit utilization - because you now have less available credit. This one could affect the credit score as far as utilization is concerned.

  1. Your credit score could go down if you check your own credit

Indeed, it is true that having several credit inquiries may negatively impact your score. However, this isn't true if it's you who's doing the checking. You have the right to check your credit on a daily basis, and still would not have any impact on the score.

As a matter of fact, this shows that you are staying on top of your scores by checking for any fraudulent activity and ensuring that it is well regulated.

  1. If you work with a credit counselling agency, the credit bureaus will come after you

It's not true that the act of working alone with an agency would hurt your score. This will not be reported and should not have any impact to your credit scores. However, your succeeding actions (as recommended by the agency) can have an impact your score.

Whether you decide to keep paying in minimum or close the debt down in one go - these are the actions visible to the credit bureaus, and will have an effect on your credit standing.

  1. If you earn less, then you'll always have a lower credit score

Just the same as credit counselling, one's earnings and income should have no effect on your credit score. A person who earns highly could still be under a big pile of debt, compared to a low earner with a pristine line of credit. Income is not seen as a determinant of financial responsibility, and should never be used against a person when it comes to judging his or her credit.

  1. If you pay off your cards, your score will stay as it is

Another common myth, which is sadly believed by many - is that a person needs to carry an outstanding balance on his or her credit card to keep on generating activity. However, this is not true at all. The best thing you can do to keep a stellar score is to pay off the bills in full on a monthly basis. If you are regularly using the card, paying it off in full and leaving no balance behind will send good news to the credit bureaus.

  1. If you do rate-shopping for loans, then it will create a dent on your score

When applying for a loan or a credit card, the lending company usually performs a hard credit check to look at your creditworthiness. One or two of these checks could lead to a small yet temporary decrease in your rating. Having several of these inquiries over time can also drag your score down while sending a red flag to potential creditors.

This shouldn't be the case though, if you're looking around for loans. Understandably, you would want to look at the best options possible and the way to do it is to ask around, which means that several lenders will be looking at your score.

The FICO score actually does ignore any inquiries that are made 30 days before scoring. So, timing is key. If you could find a loan within 30 days, then these hard credit checks should not affect your score as you rate shop.

  1. Your low credit score could cost you that job

While it is not an uncommon process for employers to look at some components of your credit report, being part of the hiring process, they will not look, or even consider doing so, to look at your credit rating. It is illegal to use credit scores or ratings to be used as tools to screen employees.

Furthermore, employers can only pull the credit reports upon your permission and yet, they still won't see the big picture. They may do this to look for hints of irresponsible behaviour - but your rating, regardless if it is high or low, should not be a factor when it comes to considering you for employment.

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