When I saw the subject article on Yahoo! Finance, I was pleased to note that my EQ article “Take Control of Your Credit Rating ” covered these myths in detail. Take the quiz and see if you are armed with the necessary information.
Myth #1: Closing a card after paying off a massive debt load is a fine idea.
Myth #2: Your employment history impacts your score.
Myth #3: Financing a big purchase — like a new home or car — will lower your score.
Myth #4: The older you are, the higher your score.
Myth #5: Checking my score will lower my score.
Myth #1: Closing a card after paying off a massive debt load is a fine idea.
Closing a credit card account may actually increase what's known as your debt-to-credit utilization ratio, which is the sum of all your outstanding credit card debt divided by the sum of all your credit card limits. A higher utilization is considered risky by credit score calculators and can potentially ding your score — in the wrong direction. To earn the highest score, try to use no more than 10 percent of all your available credit.
Closing a credit card account may actually increase what's known as your debt-to-credit utilization ratio, which is the sum of all your outstanding credit card debt divided by the sum of all your credit card limits. A higher utilization is considered risky by credit score calculators and can potentially ding your score — in the wrong direction. To earn the highest score, try to use no more than 10 percent of all your available credit.
Myth #2: Your employment history impacts your score.
This isn't true, yet more than half of consumers surveyed believe having a steady job track record improves a credit score. Of course, having a job helps you to qualify for a loan, but it's not factored into your credit score.
This isn't true, yet more than half of consumers surveyed believe having a steady job track record improves a credit score. Of course, having a job helps you to qualify for a loan, but it's not factored into your credit score.
Myth #3: Financing a big purchase — like a new home or car — will lower your score.
Your score won't be affected for simply taking on a new loan like a mortgage or car loan. Actually, having a variety of credit cards and loans—and managing them responsibly—can help boost your score. In fact, about 10 percent of your FICO credit score is dependent on the "types of credit used."
Myth #4: The older you are, the higher your score.
While it's true that the length of your credit history factors into your credit score, it doesn't take into account your age.
Your score won't be affected for simply taking on a new loan like a mortgage or car loan. Actually, having a variety of credit cards and loans—and managing them responsibly—can help boost your score. In fact, about 10 percent of your FICO credit score is dependent on the "types of credit used."
Myth #4: The older you are, the higher your score.
While it's true that the length of your credit history factors into your credit score, it doesn't take into account your age.
Myth #5: Checking my score will lower my score.
Looking up your own score yourself is totally harmless. In fact, it's recommended that you check your scores yearly from each of the three major credit reporting agencies: Experian, Equifax and TransUnion. On the other hand, if a lender or credit card company checks your credit score, it's likely recorded as a "hard" inquiry and may work against you if you have multiple financial institutions checking your credit. One exception is if you're shopping around for a mortgage or car loan and receive multiple credit inquiries from lenders within a short time frame. All the inquiries in this case will typically count as just one inquiry and should do little to no harm on your credit score.
Looking up your own score yourself is totally harmless. In fact, it's recommended that you check your scores yearly from each of the three major credit reporting agencies: Experian, Equifax and TransUnion. On the other hand, if a lender or credit card company checks your credit score, it's likely recorded as a "hard" inquiry and may work against you if you have multiple financial institutions checking your credit. One exception is if you're shopping around for a mortgage or car loan and receive multiple credit inquiries from lenders within a short time frame. All the inquiries in this case will typically count as just one inquiry and should do little to no harm on your credit score.
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