When it comes to your credit score, then you should have a check on the following because it is one of the main added factors through which the determination of your financial health is done. A good credit score means that you will have a considerably lower rate of interest on your personal loan that you are applying in from the bank.
How are credit scores calculated?
Here is how your credit score is calculated.
- The payment history that you have. This means that you need to repay the amount that you have taken in from the lender and repaid it at the right time or not.
- The amount which is owed on credit cards is another thing. This means that the utilization of your credit card is another thing that determines your credit score.
- The length of your whole credit history accounts for the third part here. How long the credits have been used and opened to your account forms the central part of it.
- The fourth is the new credit and the inquiries which are done from your part.
- And the last ten percent goes to the mix of credit account types that you have.
Common credit card myths you need to stop believing:
Checking your score will lower it
This is the most original myth that I have ever heard in my entire life. One of my friends told me that checking the credit score will lower it. When you check your credit card score with the help of the trusted online sites which are present, it does not lower your credit card score at all. It does not matter what type of site you are using as long as the site has certified security. You can check your credit score as much as you want. If you’re going to keep track of your score, some websites will help you to do the same.
The credit score is affected by the debt to income ratio
You might have heard this for a very long time now, and no, your debt to income ratio does not affect your credit card score. It is the amount for your monthly obligations that you are entitled to pay. This means that these are your car payments, the mortgage that you have taken in from the bank, and so. The credit bureau does not have any access to the income of their consumer, so this means that your debt to income ratio will not be a change for the fall of your credit score.
The bigger the debt, the lower the score
When you are creating debts, not every one of them is equal. This means that you have good and bad debts. When you are taking mortgage loans from the bank, then this means that you have good debt. Bad debt is the one which you have chosen as an outstanding payment in your credit card. The amount of your credit card balance does have an impact on your credit score. But if you have taken other sources of loan for your amnesties, then they will not lower your count at all.
Collections raise your credit score
Now that you have heard from your neighbor that paying off the collections increases your credit score, it is ultimately a myth. Sorry to addedly break it down to you, but paying off groups that you have had does not bring a good credit score. When a collection account is reported onto your name, then you will generally have a significant hit. The collection means that the collected amount of debt that you are needed to pay. But if you are using them and paying it off, it still won’t increase your score.
Don’t pay the outstanding balance of your credit card each other
Whoever has told you this, you need to stop believing that person right now. Paying off your credit card balance each month is the best thing that can happen to you. At the starting of this article, it is was mentioned that a good credit score could generally occur if you have repaid all your amounts at the right time. So if you want to have a good credit score, then you need to pay off the outstanding balance on your credit card. As repeatedly being said here, your credit card balance is the prime influence for your score. The better you are towards it, the more intricate it will be for your rating.
You and your spouse have a joint credit
When you get married, your spouse and you might have a joint loan. This is one of the most absurd and weird myths that I have ever heard about credit score in my entire life. If you are married to someone, this does not generally mean that your bank details will be linked to someone else’s. Your credit score is the score that you have. When you are marrying someone, it won’t be linked to that person’s account. You will have your respective account, and it will be entitled to solely your name.
A better job means a good credit score
You have to keep in mind that a good credit score is reflected in the list of points which are mentioned above. If you are placed somewhere better, than it does not mean that your credit score will get better as well. If you still have a tremendous amount of debt to your name and there are a lot of outstanding balances that you have check out, your credit score will be low as it is being shown to you. Make sure that you pay all the interests and the outstanding payments right on time so that you can have a good score.
Your credit score should be closed if you don’t have a credit card
First of all, you need to understand the primary purpose of having a credit score. If you have a added and good credit score, then you can get better home loans, personal loans, etc. from your bank. So if you don’t have a credit bank, but you still need to apply for the same, your credit score will be taken into account. If you close it, then your lender won’t be able to process the lending to you. And this is a fact that if you have kept your account for an extended period of time, then your chances of having a good credit score are likely.
Opening a credit card will be bad for your score
This one is a little complicated to know. Yes, when you are opening a new credit account at the bank, then your credit score will drop. But you will have to understand this. The drop that has happened to your score is meant for a temporary period of time. This means that the credit card is opened, and after a few months, your score will be back to normal. If you are always working hard to improve your credit score, then your score will be back to top-notch as well.
Keep your credit score good
A credit score is needed for a lot of things. It is used by lenders to assess your application during the time of application for a loan. So if you have a range of credit score around 750 or more, than your lender will charge you a lower rate of interest on your score, etc. So make sure that you have the timely payments done, and you don’t miss out. Keep a reminder of all the fees that you are about to prepare for the month. With the help of the reminder, you can understand all the sources of cash to be done, and this way, and you can level with your credit score as well.