3 Common Credit Report Myths

Very little is known about how credit scores work even after all these years. It’s a known fact that FICO, creators of this system, didn’t even want customers to know what factors mattered in maintaining an excellent credit score.

It’s no wonder that there are several myths floating around about how one can improve their credit scores.

So, here are 3 common credit score myths that should be ignored:

#1: You need to have a credit card balance if you want a good credit score

Your credit score has no knowledge of whether you have a balance or are paying it off in full every month as the last balance reported to the credit bureau is usually the balance from your last statement. It has nothing to do with what was left on your statement and so it is a good idea to pay the bill before the due date and save yourself the interest anyways.

#2:  Handling your finances well will ensure a good credit score

Your credit score only measures how you handle credit but it could suffer if you barely used credit in the first place by cutting your credit cards or maintaining all your balances. Unfortunately, your credit score is only in place to evaluate whether there is a possibility that you might default on your payments if given a loan or any other credit product.

#3: How you handle credit determines how trustworthy you are

Employers often perform credit checks in order to verify whether it is possible for employees to commit fraud but there hardly exists a link between the two because almost two-thirds of bankruptcies in the United States in 2007 was due to medical reasons. It should be obvious that people get into trouble for all the wrong reasons.