There is a lot of misinformation out there about credit scores and how they are calculated. These credit score myths arose from people that really didn’t understand how credit scores worked and the information spread from person to person until it became common knowledge. Confusion about our credit scores can result in making financial mistakes that can have considerable impact on our financial future. Here are some common credit score myths that you can ignore from here forward.
Myth 1 – There Is Only One Credit Score To Worry About
Many people believe that they only have one credit score to worry about and that every lender or company that pulls their credit score is looking at the same information. The truth is that there are many different credit score models out there and the company that pulls your credit score could be looking at any one of them. There are 49 different scores in the popular FICO model alone. Credit scores can vary based on what type of inquiry is being made, what credit bureau data is being used and which model is being used. While many of the credit scores use roughly the same information, some may be different enough to qualify you or disqualify you for whatever you are seeking from the company that pulled your credit score.
Myth 2 – If You Check Your Credit, It Hurts Your Score
Some people never check their credit score or credit report because they think that they will hurt their credit score if they do. While inquiries about your credit score can cause your credit score to drop, it is only when lenders and other companies check your credit score. This is called a hard inquiry and is designed to keep consumers from applying for credit at many different creditors within a short period of time. However, checking your own credit score is called a soft inquiry and will not decrease your credit score. It is recommended that everyone check their credit score and credit report several times each year to ensure that they know what is going on with their credit.
Myth 3 – You Cannot Close Your Oldest Credit Card Without Hurting Your Credit Score
Many people also believe that they cannot close their oldest credit card without causing significant damage to their credit score. The mistaken thinking is that closing the card removes the history of the credit card from your credit history, making the length of time you have had credit shorter and your credit score lower as a result. This is not entirely true. All of your credit accounts, whether opened or closed, remain on your credit report. However, closing the account can reduce your available credit by a significant amount, which can harm your credit score by skewing the ratio between the amount of credit you have and the amount of credit you are using.