Credit report with score on a desk
Forty percent of us think our credit score will climb if we carry a small balance (nope), and 52% don’t realize bad credit can increase the amount needed for deposits on utilities (it can!), according to a NerdWallet survey. Hartz Homes recognizes that there are myths and misinformation about credit scores. And, these myths can haunt you when you are trying to buy a new home. Here are seven top credit score myths, and the reality behind them.
Myth #1: Always carry a small balance on your credit card.
Reality: Credit scores are based on two main things: that you pay your bills on time, and that you don’t constantly max out the credit you have.
And yes, one of the items they like to see you pay is your credit card bill — all of it. The only thing a running balance increases is the interest you owe.
Myth #2: It’s OK to pay credit cards a day late if you pay them off in full.
Reality: Missing a payment can be the biggest way to hit your credit score. To maximize your score, always pay your installment loans (like car loans and mortgages) on time and in full. But, if you need to pay late for a legit reason, call your lender — before the due date — and have a frank conversation. They’ll often help out.
Myth #3: Closing old cards will erase any negative history.
Reality: Credit-reporting companies keep information on your file for seven years.
And, the longer you’ve responsibly used a particular credit card, the better effect it has on your credit score. Remember, you’re judged by how much of your credit you’re using. Closing a credit card makes that percentage change for the worse.
Myth #4: If you’ve never had credit, you have a perfect credit score.
Reality: If you’ve never used credit, it’s anyone’s guess how well you’ll handle it once you do. Credit reporting agencies call it a “thin file,” meaning there’s not enough information on you to create a credit score. So, if you’re a newbie, think about getting a card or loan, and start fattening up that file.
Myth #5: Checking your credit score frequently will hurt your score.
Reality: It’s true that several “hard” checks by companies can ding your score a few points. Hard checks generally happen when you are actually seeking a loan or line of credit, such as a mortgage or credit card.
If you check your own, it’s called a “soft” check, and it doesn’t hurt your score. Many experts suggest that you check your score and credit report at least annually. It’s super easy these days, especially with websites like creditkarma.com, or use a banking app that lets you easily monitor your score.
Myth #6: Paying off a student loan or car loan early will hurt your credit.
Reality: Credit report companies do not punish you for paying off loans early. While responsibly paying installment loans may be good, paying off those loans is normally better.
Myth #7: Your age, sex, and other non-money issues affect your credit score.
Reality: Federal law protects you from credit discrimination based on non-credit issues, like race, color, national origin, or sex. Sure, credit card companies or lenders can ask, but they can’t deny you credit based on your answers. Income, expenses, debts, and credit history are what matters.
Note: Hartz Homes provides this information as a service and does not guarantee its correctness. You should get financial advice from a financial professional.
Please check out these new home communities from Hartz Homes:
Armitage Pointe of Addison, Illinois (Chicago area new home construction)
Bella Vista Townhomes of Bolingbrook, Illinois (Chicago area new home construction)
Lago Vista of Lockport, Illinois (Chicago area new home construction)
Leigh Creek of New Lenox, Illinois (Chicago area new home construction)
Marquis Pointe of Montgomery, Illinois (Chicago area new home construction)
Marywood Meadows of Montgomery, Illinois (Chicago area new home construction)
Nantucket Lakes of New Lenox, Illinois (Chicago area new home construction)
Park West of Manteno, Illinois (Chicago area new home construction)
Playa Vista of Plainfield, Illinois (Chicago area new home construction)
Shannon Estates of New Lenox, Illinois (Chicago area new home construction)
Sky Harbor of New Lenox, Illinois (Chicago area new home construction)
Whisper Creek of Mokena, Illinois (Chicago area new home construction)
Hartz Homes has new home communities in:
Addison, Illinois (Chicago area new home construction)
Aurora, Illinois (Chicago area new home construction)
Bolingbrook, Illinois (Chicago area new home construction)
Lockport, Illinois (Chicago area new home construction)
New Lenox (Chicago area new home construction)
Manteno, Illinois (Chicago area new home construction)
Mokena, Illinois (Chicago area new home construction)
Montgomery, Illinois (Chicago area new home construction)
Plainfield, Illinois (Chicago area new home construction)