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Credit Score Facts vs. Myths: 5 Things to Know From Someone Who Learned the Hard Way

Hey everyone!

If there’s one thing in adulting I wish I had a guidebook for, it’s understanding credit scores. Picture this: fresh out of college, I thought credit was a mystical force—something only bankers and finance gurus talked about. Fast forward to me trying to rent my first apartment and getting denied because of my “credit history,” or lack thereof. Ouch!

In my quest to figure things out, I’ve come across countless myths and misconceptions. Today, I want to share with you five crucial credit score facts and debunk the myths that led me astray. Let’s save you from the mistakes I made!

1. Myth: Checking your credit score will lower it.

Fact: Checking your own credit score is known as a soft inquiry and has no effect on your score. It's essential to keep tabs on your score. You're actually entitled to one free report from each of the major credit bureaus annually. However, when a lender checks your score because you've applied for credit (known as a hard inquiry), that might have a small, temporary impact.

2. Myth: Closing old credit cards boosts your score.

Fact: Oh boy, did this one get me! Contrary to popular belief, closing old or unused credit cards can hurt your credit score. Why? Credit age (how long you've had credit) and credit utilization (the percentage of available credit you're using) play a big role in your score. Closing an old account can decrease your credit age and increase your credit utilization ratio. If you don’t want to use a card, just leave it in a safe place, but reconsider cutting it up.

3. Myth: Carrying a balance on your credit card helps improve your score.

Fact: No, no, and no! Carrying a balance means you're paying interest, and it can increase your credit utilization ratio. It's best to pay off your full balance every month if possible. If you can't, aim to keep your utilization below 30%.

4. Myth: All debts are bad for your credit score.

Fact: Not all debts are created equal. While having a ton of credit card debt can be damaging, having a mix of credit types—like a mortgage, auto loan, or student loan—can actually be beneficial if managed responsibly. Lenders want to see that you can handle different types of credit.

5. Myth: A low credit score will haunt you forever.

Fact: Your credit score isn't set in stone. If you have a low score due to financial mistakes or a lack of credit history, there's hope! With responsible credit behavior like timely payments and low credit utilization, your score will improve over time. It's all about building and maintaining good habits.

In wrapping up, if there’s anything I want you to take away from my journey, it’s this: Your credit score is like a financial report card, and it’s within your power to score an A+. Stay informed, avoid the myths, and your future self will thank you!

If you found this post helpful, share it with someone who needs a little credit clarity. Let’s debunk these myths together! 💪 #CreditScoreUncovered

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