Since the day I turned 18, I have always been conscientious of my credit score. Over the years it has remained relatively high. However, it hasn’t budged in the last few years. I feel like I’ve reached a credit plateau and wasn’t sure how to boost my score. Then, I realized that I had been buying into these 7 myths about improving your credit score.
7 Myths About Improving Your Credit Score
1. Checking your credit reports hurts your credit score.
This is one of the most persistent myths about improving your credit score that many people still believe. If you’re like me, it probably stems from misunderstanding what kind of inquiries affect it.
There is a distinct difference between “soft pulls” and “hard pulls” of your credit history. Requesting your free credit report from one of the credit bureaus or getting your FICO score from your bank won’t hurt you. On the contrary, regularly monitoring your credit score can help you track your progress as you work towards improving your credit. These inquiries are considered “soft pulls” that don’t impact your score.
However, when you submit a formal application, a “hard pull” could make your score slightly drop. Furthermore, each “hard pull” will cost you a few more points. And, it could signal a red flag for potential lenders if you have recently submitted several credit applications.
2. Maintaining a balance on your credit card will improve your credit score.
This is one of the worst myths about improving your credit score that I fell victim to. When I got my first credit card, I misunderstood how paying off revolving credit worked. I thought that carrying a balance on my card would boost my score. But after receiving my first few statements, I quickly saw how much more I was paying in interest.
If you aren’t paying the balance in full each month, this can actually work against you. Not only do you pay more in the long run, but it could also ding you if you miss a payment. And, it also affects your credit utilization rate which is directly linked to your credit score.
3. Immediately paying off your debt boosts your score.
The problem with this myth is that there is some truth in it. Consistently paying off your credit card charges each month will boost your score. However, paying off installment debt such as loans and mortgages could be to your detriment. If you pay them off too quickly, there could be penalties. And, it will reduce the number of credit accounts and available credit you have. This also affects your credit utilization rate.
Maintaining a history of repayment on several accounts will raise your credit score faster. Make sure you are meeting your minimum monthly payments. But, perhaps you could put extra funds towards your high-interest debts first. Not only will it help boost your credit score, but also save you money in interest fees.
4. Closing credit card accounts increase your credit score.
I used to carry several credit cards in my wallet. But, I found myself only using one or two of them regularly. Rather than running the risk of the others getting stolen, I decided to close the accounts.
Unfortunately, I didn’t understand how this would impact my credit score. Since I had fewer credit accounts and less available credit, my credit utilization rate drastically changed. In turn, it caused my score to drop. The good news is that I have rebuilt it with consistent payment history since then. But, if I could go back, I would have kept the ones without an annual fee to help boost my score.
5. A higher salary will improve your credit.
Although earning a higher salary can improve your ability to repay a loan, it won’t affect your credit score. This figure isn’t reported to the credit bureaus, so it isn’t factored into your score. Your credit report will only contain information about your payment history and the amount of credit you have. However, it may be an important factor for lenders who are deciding to approve your credit application.
6. Regularly using your debit cards will raise your credit score.
While they may look the same, credit and debit cards are two completely different animals. While credit card usage directly impacts your score, debit cards don’t because they don’t use credit. This is true even if you choose the “credit” option on the card reader. Your debit cards are tied to your checking account, so the activity is never reported to the credit bureaus.
7. Credit report companies can remove black marks on your credit report.
Many scammers out there claim they can fix your credit by removing things from your credit history. This is a bald-faced lie. The only way to remove something from your credit report is if the information is inaccurate. While there are legitimate companies that can assist you with creating a plan to raise your credit score, they won’t do anything that you can’t do for yourself.
If there is inaccurate information on your credit report, you can dispute it yourself. There are several ways you can do this such as submitting evidence to contest the negative information, asking the bureaus for validation on questionable items, requesting a goodwill request for deletion from the creditor, sending a pay for delete letter, or waiting it out.
Although hiring one of these companies to act on your behalf can save you time and convenience, there is no magic wand that will remove the black marks on your credit report.
The Hard Truth
As hard as it may seem, the only way to repair bad credit is with time and self-discipline. You must take the steps to regain control of your finances, advocate for yourself with creditors, and develop better credit management.
If you feel like you are in over your head, it never hurts to take speak with your financial advisor or set up a free consultation with a reputable credit management company. An hour of your time may be the difference between remaining on the credit plateau and improving your credit score.
- Tips on How to Improve Your Credit Score
- What To Do If Your Credit Report Is Inaccurate?
- Alternate Loaning Option for Bad Credit
Jenny Smedra is an avid world traveler, ESL teacher, former archaeologist, and freelance writer. Choosing a life abroad had strengthened her commitment to finding ways to bring people together across language and cultural barriers. While most of her time is dedicated to either working with children, she also enjoys good friends, good food, and new adventures.