Credit myths and tips for 2023:
1st Myth: Credit checks do not affect credit rating
Contrary to popular belief, credit checks can actually lower your credit score. A soft inquiry and a hard inquiry are the two main types of credit checks. A soft inquiry involves checking your own credit without any effect on your score. A hard inquiry, on the other hand, is when a lender assesses your creditworthiness for a particular financial product, and this can lower your score. There are exceptions, however, such as when you are rate shopping for a car loan or mortgage, in which case multiple requests made in a short period of time are considered as one hard inquiry. All requests must be submitted within two weeks for this to be valid.
2n/a Myth: It’s good for your credit score if you close an unused credit card
Many consumers are under the impression that closing unused credit cards will improve their credit score. This is not the case; in fact, it can hurt your score. This is because it lowers the average age of your accounts and increases your credit usage. There may be valid reasons to close a card, but not using it should not be one of them.
3rd Credit myth: Your score will be better if you have a balance left on your card
This myth is widely believed but it is not true. Leaving a balance on your card does not do your credit any good and can even be risky if the balance is a large percentage of your accessible credit limit. This is because it will increase your credit utilization, which has a negative impact on your score. Furthermore, it can also lead to interest charges, which can be costly due to the double-digit interest rates of credit card debt.
Say goodbye to these myths and remember these tips for 2023 to ensure financial peace of mind!