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6 Common Credit Myths

You might not think that having good credit is essential until you try to buy a new car or a home and you’re denied a loan. Bad credit might even make it difficult to get simpler things, like utilities set up or getting new mobile phone service. Having good credit is crucial to your financial health and stability. So, do you know how to get good credit, and what may negatively impact your credit score? This article debunks the biggest common credit myths. Learn about them here, and if you have questions, feel free to contact Primary Residential Mortgage.

Credit Is Hard to Get If You Don’t Already Have It

When lenders review potential loan applicants, they look at four things on a credit report: identification, account history, public records (bankruptcy filings and judgments), and recent inquiries. If a credit history has not been established, an applicant may be turned down or need a cosigner. A good option for those just starting to build credit when they don’t have a cosigner is a secured credit card, which requires users to put up cash as collateral. You can also try to get a credit card with a retailer, or a gas card. Because they have smaller limits, it’s often easier to qualify, but be sure to use them sparingly and make your payment on time.

Once a Credit Score Is Bad it’s Impossible to Fix it

A credit report is really a credit history, and credit can be rebuilt over time. Late or missed payments can stay on your credit report for up to seven years. Rebuilding credit requires making timely payments and not maxing out your credit cards. Additionally, the longer a credit history goes without negative information, such as late payments, the more your credit score will improve. The older negative information is, the less significant it becomes.

Checking a Credit Report Will Hurt Your Score

If you check your credit reports, it doesn’t have any effect on your credit scores. Reviewing a credit report results in what is called a “soft pull,” or “soft inquiry” and soft inquiries have no effect on your credit score as they are never considered a factor in credit scoring models.

Education Level Can Affect Your Credit Score

Information in credit reports relates only to debt-related information. Therefore, credit cards, loans, and payment history will be reported, as well as bankruptcy and civil judgments (debt owed through the courts). Information about assets, checking accounts, and education levels are irrelevant.

Too Much Credit Is Bad

Many people say that too much credit is what caused the recession and that it gets Americans into trouble. Spending too much is what can get people into financial trouble and that may or may not involve the use of credit. Credit is a financial tool that can be beneficial if used wisely, but if it’s abused, it can get people into trouble. Everyone should set a budget and stick to it.

Paying Cash for Everything Helps Build Credit

Using cash for everything is good for budgeting but isn’t good for building credit. Using credit responsibly helps consumers establish a history of responsible credit usage and builds their credit score. If various kinds of credit accounts are not established and maintained, your credit scores won’t be as good as someone with a long history of responsible credit use.

Don’t be afraid to establish credit and use it in a responsible manner. Remember these common credit myths and do what you can to build your credit so that it’s there when you need it. Primary Residential Mortgage is here for you. Let us know if we can be of service.

You might not think that having good credit is essential until you try to buy a new car or a home and you’re denied a loan. Bad credit might even make it difficult to get simpler things, like utilities set up or getting new mobile phone service. Having good credit is crucial to your financial health and stability. So, do you know how to get good credit, and what may negatively impact your credit score? This article debunks the biggest common credit myths. Learn about them here, and if you have questions, feel free to contact Primary Residential Mortgage.

Credit Is Hard to Get If You Don’t Already Have It

When lenders review potential loan applicants, they look at four things on a credit report: identification, account history, public records (bankruptcy filings and judgments), and recent inquiries. If a credit history has not been established, an applicant may be turned down or need a cosigner. A good option for those just starting to build credit when they don’t have a cosigner is a secured credit card, which requires users to put up cash as collateral. You can also try to get a credit card with a retailer, or a gas card. Because they have smaller limits, it’s often easier to qualify, but be sure to use them sparingly and make your payment on time.

Once a Credit Score Is Bad it’s Impossible to Fix it

A credit report is really a credit history, and credit can be rebuilt over time. Late or missed payments can stay on your credit report for up to seven years. Rebuilding credit requires making timely payments and not maxing out your credit cards. Additionally, the longer a credit history goes without negative information, such as late payments, the more your credit score will improve. The older negative information is, the less significant it becomes.

Checking a Credit Report Will Hurt Your Score

If you check your credit reports, it doesn’t have any effect on your credit scores. Reviewing a credit report results in what is called a “soft pull,” or “soft inquiry” and soft inquiries have no effect on your credit score as they are never considered a factor in credit scoring models.

Education Level Can Affect Your Credit Score

Information in credit reports relates only to debt-related information. Therefore, credit cards, loans, and payment history will be reported, as well as bankruptcy and civil judgments (debt owed through the courts). Information about assets, checking accounts, and education levels are irrelevant.

Too Much Credit Is Bad

Many people say that too much credit is what caused the recession and that it gets Americans into trouble. Spending too much is what can get people into financial trouble and that may or may not involve the use of credit. Credit is a financial tool that can be beneficial if used wisely, but if it’s abused, it can get people into trouble. Everyone should set a budget and stick to it.

Paying Cash for Everything Helps Build Credit

Using cash for everything is good for budgeting but isn’t good for building credit. Using credit responsibly helps consumers establish a history of responsible credit usage and builds their credit score. If various kinds of credit accounts are not established and maintained, your credit scores won’t be as good as someone with a long history of responsible credit use.

Don’t be afraid to establish credit and use it in a responsible manner. Remember these common credit myths and do what you can to build your credit so that it’s there when you need it. Primary Residential Mortgage is here for you. Let us know if we can be of service.

 

Note: Opinions expressed are solely my own and do not express the views of my employer