Studies have shown, time and again, that debt takes a serious toll on our mental and physical health. Migraines, poor sleep, and heightened anxiety have all been linked to debt stress. So it may come as no surprise that even discussing credit scores has been shown to increase symptoms of anxiety in individuals across all demographics.
But what if it didn’t have to be so bad? Are you worrying about things that you don’t actually need to worry about, and do you know how credit actually works? Here are the top credit score myths debunked, so you can feel confident in your finances:
1. If You Don’t Make A Lot Of Money, You Will Have A Bad Credit Score
This is the biggest credit score myth that seems to keep people up at night, but your salary doesn’t affect your credit score. A minimum wage employee can have an excellent credit score, as long as they have good bill payment habits. So, if you are making the minimum payments, you are actually helping your credit score by building a consistent, positive payment history.
2. Applying For New Credit Will Hurt Your Credit Score
When asking for new credit, a request – otherwise known as an inquiry – is submitted for your credit report. These inquiries make up 10% of your credit score, and can possibly affect it negatively. However, depending on the values of the other 90%, your credit score may not move at all when applying for new credit.
3. Pre-Approved Credit Cards Will Negatively Impact My Credit Score
There are two types of inquiries that can be conducted on your credit report: a hard inquiry and a soft inquiry. Many credit card companies will perform soft inquiries – which do not affect your credit score – in order to check if you pass a certain number of qualifications for pre-approval. One of our experts can help you determine which of our many excellent credit cards for which you may be pre-approved.
If you do decide to apply for a credit card you have been approved for, a hard inquiry will be performed, which will affect that 10% of your credit score. However, there are some benefits to taking advantage of a pre-approval:
- You can reduce the impact on your credit by using one pre-approved credit instead of applying for several others later, and
- Pre-approved credit cards can, in many cases, include better terms than those available to the general public.
4. Upgrading My Current Card Will Affect My Score
Changing your credit card to one that better serves you does not affect your credit score. Most companies will allow you to upgrade to a card with perks – such as travel points – with no credit report, provided you already have the minimum balance on your current card. If you require a credit report to upgrade to a card with a higher minimum balance than what you currently have, this could affect your credit score temporarily.
Contact The Mortgage Station
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Putting our clients first, we can bring peace of mind to all homeowners with knowledge and planning that will help them to unlock the financial opportunities that best meet their needs.