There’s a lot of information out there about the credit score. However, all of that need not be true. At times, various myths and opinions are presented as facts, which new financial participants easily believe in. This misinforms and mist guides people, and thus can lead them to make the wrong financial moves. For a clear picture, here a list of myths about credit score, that keeps you away from improving your credit score:
Myth- A credit score only helps in borrowing a loan.
Fact-A credit score gives a clear insight into one’s financial credibility. Though it is an essential element in borrowing all forms of loans, whether secured or unsecured, yet, it is required at other places as well. These could be insurance plans, renting properties, or job verifications.
Myth-A large credit card balance improves a credit score.
Fact- Credit card balance can never directly improve your credit score. A credit card balance does affect your credit utilization ratio, that is the ratio of credit balance and credit limit. This ratio is considered good when it is on the lower. A lower range, however, is created by timely payments. Thus it is not the balance that affects the credit score, indeed, on-time payments of credit card bills.
Myth- Each individual has only one credit score.
Fact- A single agency does not calculate a credit score. Instead, there are many agencies out there, though some of the popular ones are CIBIL, Experian, Equifax, or Highmark. The credit score may thus vary across these agencies. The variation is likely to be slight and not a major one unless a big financial step is overlooked.
Myth- Credit score can be improved by paying money.
Fact- The only way a credit score is improved because of money and monetary transactions, is when on-time payments of loans and bills are made. Activities such as corruption and scamming can only fool people and can never improve their credit score. Indeed, a credit score can be improved only if one performs good financial deeds.
Myth- Constantly checking your credit score is not advisable.
Fact- A time-to-time check on your credit score is one of the most healthy financial habits. It ensures spotting errors in your cibil report, if any, and thus makes it accurate and presentable.
Thus, no information about credit score should be believed blindly. Instead, one must first check whether it’s genuine or not, and then must inculcate it in their financial functioning.
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