Let’s Debunk These Top 7 Credit Score Myths That Often Misguide You

PUBLISHED Dec 21, 2022, 6:31:19 AM        SHARE

imgThe Purpose of Money Blog

Your credit history and credit score are how a lender determines your creditworthiness. A good credit score shows the lender that you have a lower risk. And a poor credit score implies otherwise.

No time to read this now? Pin it for later.

Today, there is a ton of information about the importance of your credit scores and the need to check them regularly. But you don’t have to check your score daily. That’s just a myth. There are other credit score myths out there, but this article will debunk the top seven credit myths.

Top 7 Credit Score Myths and The Truth

Here are the top 7 credit score myths and the truth about credit. Check them out and increase your awareness.

Myth #1: One Missed Mortgage Payment Doesn’t Impact Credit Score

Fact: Every missed payment counts! Yes, various factors count when it comes to your credit score. But a missed payment is one of the most influential. And a missed mortgage payment is significant since your mortgage tends to be one of your largest monthly payments.

Missing a mortgage payment can negatively impact your credit score for months.

Myth #2: Student Loans and Personal Loans Negatively Affect Your Credit Score

Fact: In some cases, student loans may appear on your credit report before you graduate or while you’re in deferment status. Deferment status just means your loan payments are not currently due. However, student loans in deferment do not negatively impact your credit score.

However, once repayment on your loans begins, don’t miss a payment! If you have to miss a payment for any reason, contact the leader to see what arrangements can be made. A missed payment could decrease your credit score and impact your ability to qualify for other loans like a mortgage in the future. Lastly, paying your student loans on time will help you build credit.

On the other hand, low-interest personal loan repaid on time also increases your credit score.

Myth #3: Credit Scores Increase by Closing Inactive or Old Accounts

Fact: False! The old and unused accounts are a part of your credit history. When you close them, you cut your credit history short. But a more extended credit history is better for your credit score. It’s rather preferable to keep your oldest credit cards active by making small transactions and paying them off in full every now and then.

Keeping these accounts open also increases your debt-to-credit ratio, directly affecting your credit score.

Myth #4: Your Credit Score Goes Down by Checking it

Fact: It doesn’t work like that! It takes hard inquiries to lower your credit score. Those inquiries are generally conducted by lenders when you apply for a loan. Your request for a copy of your credit report is considered a soft inquiry. These types of inquiries don’t affect your credit history or credit score.

You must check credit reports from time to time to know where you stand. This way, it can be corrected in case of an error. You can access a free credit report for each credit bureau once a year. Visit Annualcreditreport.com to see your latest reports today. Just note you may have to pay to see your credit score.

Myth #5: Once a Low Credit Score, Always a Low Credit Score

Fact: Credit score is not forever! It keeps changing with your payments and non-payments. You can repair your credit history anytime by getting a low-interest personal loan or a credit card and repaying it on time.

You can also get different types of credit to improve your score. For example, you could get a mortgage, car loan, or other installment loans to diversify your credit. Once you start paying this debt off lenders will be able to see your ability to successfully pay off different types of debt.

Yes, significant events like bankruptcies are on your credit report for several years. But eventually, even bankruptcies fall off your report. It’s never too late to adopt good financial practices.

Myth #6: Your Age Impacts Your Credit Score

Fact: Age has nothing to do with your credit history or credit score. Your credit behavior is solely responsible for increasing or decreasing your credit score.

Any personal loan or credit card you get is based on your credit score and credit history. So you need to differentiate these credit score myths from the facts to manage and maintain a healthy credit score. Hopefully, debunking these credit myths helps you build a good credit profile.

Myth #7: Passive Income Affects Your Credit Score

Fact: Passive income and credit scores are not tied. These two things don’t rely on each other. However, good credit allows you to build passive income streams far faster.

Did you like this article? Check out more hot content from The Purpose of Money.

Originally Posted in The Purpose of Money

Sound investments
don't happen alone

Find your crew, build teams, compete in VS MODE, and identify investment trends in our evergrowing investment ecosystem. You aren't on an island anymore, and our community is here to help you make informed decisions in a complex world.

More Reads
Is Constellation Energy a Buy?

Constellation Energy is not recommended as a buy based on its current price, its negative margins, and its aging fleet of nuclear power plants.

Dividend Income Summary: Lanny’s November 2022 Summary

This is what dividend investing is all about! Investing in dividend stocks allows YOU to earn dividend income, the best passive income stream! Bias, you better believe it.

Dividend Kings In Focus: Northwest Natural Gas

Utility stocks are often associated with long histories of paying dividends to shareholders. Their relatively predictable earnings and recession resistance combine to make increasing dividends somewhat easier over the long term than a business that is highly cyclical.

3 Recession Proof Stocks with Low Volatility

3 Recession Proof Stocks with Low Volatility. The world is experiencing a wide range of macro troubles right now.

Bert’s December Dividend Stock Watch List: 3 Stocks to Buy!

The final month of the year is usually an insane month for the holidays. Family, food, football….its the best! Let’s make sure that December is also going to be an excellent month for dividend investing as well.

META Lesson 1: Corporate Governance

As we get deeper into earnings season for the third quarter of 2022, the biggest negative surprises are coming from technology companies, with the tech giants leading the way.

December 2022 Stock Considerations

With a new trading month already in full swing it is time, once again, to highlight some of my potential stock purchases.

Which Utilities are Investing in Utility Scale Solar?

We've researched the top public utilities in the U.S. to find the definitive leaders in solar power generation

Hershey (HSY): Dividend Stock Review

Hershey (HSY): Dividend Stock Review. As a dividend growth Investor, the best companies to invest in are quality companies with a history of growing revenues and cash flow to enable them to increase their dividends over time.

10 Top Electric Utility Stocks For Reliable Dividends

Utilities are often a favorite of dividend growth investors as they can provide excellent returns and high-income levels.

The Best Utility ETFs for Income Investors

We breakdown the pros and cons of the most popular utility ETFs and rank them by the best ETF for income investors.

Warren Buffett Stocks: Louisiana-Pacific Corporation

Louisiana-Pacific Corporation (LPX) is a leader in high-performance building solutions. The company manufactures engineered wood building products for builders, remodelers, and homeowners across the globe.

The Safest Utility Stocks to Invest in Q4 2022

We found the top 5 safest utility stocks based on volatility, drawdown, dividend policy, and dividend cuts. Why are utilities safe? We'll explain why.

7 High Return-of-Capital REITs

Real Estate Investment Trusts (i.e., “REITs”) are tax-advantaged income vehicles that have become increasingly popular with investors and institutions in recent years.

November 2022 Stock Considerations

With a new trading month already in full swing it is time, once again, to highlight some of my potential stock purchases.

Skyworks Solutions (SWKS) Stock: An Undervalued Chipmaker

Over the past five weeks, the market has been up 14.7%. Also, after the CPI report was issued last Thursday morning, the market and almost all the stocks had a tremendous run-up. In two days, the market is up nearly 7%.

2 Recession-Proof Utility Stocks With Safe Dividends

The Fed has raised the Fed Funds rate six times this year to combat inflation and the last four times at a 0.75% clip. The current 4% rate is the highest in well over a decade. But the Central Bank has indicated that it will take more pain to get that inflation genie back in the bottle.

WestRock (WRK) A Dividend Stock Comeback Story

Yes, this is a random WestRock (WRK) dividend stock, come back story. Why is it a comeback? WestRock decimated their dividend during the height of the pandemic from COVID-19. One of the world’s biggest, packaging companies reduced their dividend to $0.20 per share, per quarter from the high of $0.465.

AEP to Focus Capital Investments on Regulated Businesses, Reaffirms Operating Earnings Growth Rate of 6 to 7 Percent

Reaffirmed 2022 operating earnings guidance range of $4.97-$5.07 per share and midpoint of $5.02; 2023 operating earnings guidance range of $5.19 to $5.39 per share; Five-year, $40 billion capital plan emphasizes investment in wires and renewables

Southern Company - A Buy but Not Without Risks

We assess Southern Company to be a buying opportunity. For retail investors, this may be a good time to dollar-cost average into a position in SO.

Resources for Publishers
Resources for New Investors
Boosted with BossCoin
Financial Literacy Leaders
Tom Hamilton
Wise Intelligent
Mark Robertson
Kevin Matthews II
Akeiva Ellis
Brendan Dale
Kenneth Chavis IV
Sharita Humphrey