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4 common myths that can be damaging to your credit score

On Behalf of | May 9, 2024 | Credit Repair

It’s stressful when creditors knock on your door, asking you to pay what you owe. Well-meaning friends might suggest, “Just close your account, and all your problems will go away.” Unfortunately, this approach could harm your credit score further.

Misinformation like that is misleading and can cause you to make credit mistakes. To avoid that, here are four myths you should stop believing if you want to repair your credit.

Myth: Closing old or inactive accounts boosts your credit score

Closing old or unused credit accounts may seem like a good financial move, but it can actually lower your credit score. This is because it reduces your overall credit availability, which can increase your credit utilization ratio, a key factor in credit scoring calculations.

Although closing accounts might help curb spending, it can inadvertently increase your credit utilization ratio and thus lower your credit score.

Myth: Regularly checking your credit hurts your score

Reviewing your credit report, known as a “soft inquiry,” won’t lower your score. Regular credit report checks can help you spot errors and monitor your credit health. However, “hard inquiries” by lenders or credit card companies can have a minor impact on your score.

Remember that these inquiries usually only happen when you apply for a new credit, and their impact diminishes over time.

Myth: Your income directly impacts your credit score

Your credit score is a reflection of your borrowing and repayment history, not your income level. Lenders often consider income when approving a loan or credit card application, but it isn’t factored into your credit score.

Don’t discount income yet, though. Although income itself doesn’t affect the score, a stable income can provide the means for consistent, timely repayments.

Myth: Carrying a balance on your credit card improves your credit score

Carrying a high balance indicates a high credit utilization ratio, which can be a red flag for lenders. So, you should avoid maintaining high balances and clear your debts in full each month. Doing so reduces your credit utilization and shows responsible credit management.

Repairing your credit score after a hard hit can be challenging, especially when common myths mislead you. Knowing the correct practices that build credit, like making timely payments and keeping your credit utilization low, is crucial to seeing real improvement.

In cases of poor credit standing, consider consulting a legal professional. They can help with your specific situation.