Unravelling the Truth About Credit Score Myths

We all work hard everyday in order to make a living and to be able to pay our bills on time. Most of us have worked so hard to earn a good credit score because we knew that if we've got a good credit rating, we'll surely reap the benefits of all that hard work. But do you know what your credit score says to credit companies about you? And are you aware about the details involved in computing your credit score? Read on, as we shed some light on the truth about all these credit score myths.

Having a lot of credit cards could harm my credit score

A lot of people that owned several different credit cards thought that if they continue to maintain all of them, their credit scores will affect their good credit rating, and so they decided to have some of them cancelled. What they did not know is that everytime they cancel one of their cards, their credit rating can drop by as much as 150 points. Therefore, in reality, cancelling your credit cards, won't give you good credit rating, but instead, it will reduce the number of good accounts that you have, which explains why your rating will be lowered in case you decide to have it cancelled.

I need to keep on using my credit cards to build good credit rating

This is actually a plain old myth about credit scoring, wherein people would usually say that they need to use their credit cards in a month so to show activity on that account, and earn a good credit rating. Truth is, it's actually even better if you decide not to use your card at all, than to use it and run the risk of not being able to pay on time, which will surely ruin your credit score. Having no activity in your credit card will definitely not affect your score.

Checking my credit score will lower my rating

There are actually two types of credit score inquiries - soft and hard. A hard credit inquiry happens when a credit card company or a bank needs to check your score in order to grant you a credit. On the other hand, soft inquiry is done by some utility companies to check what your rating is, without really granting any credit to you. One common example is a cell phone company. Now, hard inquiry lowers your score, but not a soft inquiry. This means that you can check your score anytime without hurting it, because that will only fall under soft inquiry.

There is nothing that can be done to save my credit rating once I have a late payment

Although removing a late payment from several years ago is very difficult to save, late payment from last month's bill is extremely easy to remove. If your bill showed a late payment on the transaction history, just call your credit card company right away, and you'll be surprised at how easily they can remove it. Well basically, this is because they want to keep you, and that they want you to keep on using their card.

In conclusion, majority of us may not like all this credit scoring game, but we've got no choice but to play the game. And of course, in any game, we all have to learn the rules in order to win.