Credit Score Myths

Credit Score Myths

Your credit score can play a bigger role in your life than you may think. Most people believe that having good credit is only essential in obtaining a loan. However there are numerous benefits than simply qualifying for a loan such as better insurance rates, opening up employment options, or even renting out an apartment. As a recent finance graduate lets discuss some myths and things I wish I knew about credit when I was growing up.

Credit cards are bad – On your 18th birthday you qualified to get your first magical little plastic card. In college I had dozens of friends who refused to get a credit card because they thought it was unnecessary debt and would ruin their lives. The reality is that getting a credit card is the best way to start building credit. However simply getting one and never using it doesn't count, the key is to use your card routinely while only spending what you have and then paying at least your minimum payments on time.
 

Having numerous Credit cards hurt your score – Yes and no, applying for numerous credit lines in a short period of time can look very bad. However having a lot of credit cards can actually be a good thing because lenders have reviewed you financial situation and entrusted you with these accounts. As long as they’re kept track of and paid off in time.

Pulling your credit score will hurt it – Also a yes and no, there are hard pulls and soft pulls. When an agency pulls your credit score prior to opening a new line of credit, it is considered a hard pull and can impact your score negatively (slightly). If done correctly personal and credit counselor requests are considered soft pulls and will not impact your score.

Inquiries and payoffs will affect my score immediately – The purpose of a credit score is to evaluates an individual’s credit worthiness overtime. Actions that you take today whether good or bad will not necessarily impact your score immediately. This means that improving and hurting your credit will not happen overnight, in fact it may take a couple of months for the actions you took today to be reflected in your score.

These are only a handful of myths about credit. The reality is that no matter where you stand in life whether that be on the verge of purchasing a new home or a college student looking to purchase another six pack. Building and maintaining a good credit score is essential.

Ryan M. Nguyen is a Broker Associate at Keller Williams. He is a part of Carr Peck & Associates which has been recognized locally and nationally as an expert in real estate. Driven by his passion for real estate he strives to show the world what his generation brings to the table. For more information feel free to contact him or call 303.828.8720
     
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Dated: September 9th 2014
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