Are you looking to qualify for the best Credit cards or rent an apartment? Then it’s essential to understand what credit scores are and why they matter.

Credit scores are fundamental to anyone’s finances. A credit score plays a significant role in people’s lives, from the housing you want to get to the loans you need to qualify for, and in some cases, the job you’re applying for. Credit scores even impact what cell phone you can get and the deposit amount for utilities. As a result, having a bad credit score can cost thousands in interest on auto and personal loans.

There are several advantages to having a good credit score, and there are myths about credit scores that could hurt your score. Since this credit score’s benefit is essential, it is crucial to understand how credit scores work.

Some of these myths are:

Checking your credit score can lower your credit score

Though many people still check their credit scores, this myth is probably the most common. However, there is absolutely nothing wrong with monitoring your credit score, as this would help you track your progress; however, you must learn to check it correctly.

What is considered a “hard pull” is applying for credit, which could negatively impact your credit score. For instance, if you pulled a credit favor in a car dealership or mortgage bank, what everyone would think is that you applied for credit, and that inquiry could lead to a lower credit score. However, if you merely check your credit score with card issuers like Discover’s Credit Scorecard, you have only made what’s called a “soft pull”. These don’t have any impact on your credit score.

Your income determines your credit score

A lot of people still believe their income affects credit scores. They believe the more money they make, the higher their credit score. The truth is your income never directly affects your credit score. FICO calculates your credit score under these categories:

• payment history (35%)
• new credit (10%)
• amounts owed (30%)
• credit mix (10%)
• and length of credit history (15%)

There is no mention of your income among the categories. It means income does not matter where credit cards and loans are concerned. Though lenders approve loans based on several factors, earnings are inclusive, yet they are two different pieces.

Your credit score is fine if you don’t have any credit card debt

This myth sounds backward because even though you are repeatedly warned about not having credit card debt, it is worse when you don’t have any debt or credit history at all. What positive credit history means is that you have a consistent and on-time payment of all your credit. When you don’t have an active account for your credit report, you won’t get a credit score, which is never a good thing.

If you have a mortgage or auto loan, you can have a good credit score without credit cards. However, establishing a good credit history is much more comfortable with a credit card.

A good plus is when you have a diverse mix of credit such as auto loans, credit cards, and a mortgage. All of these help your credit score.

Now, what should you do?

To increase your score, make sure to:

• Pay your bills on time
• Pay off debts and keep your balances as low as possible
• Check your score and report any inaccuracies
• Don’t close any old credit cards.

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