3 Credit Myths You Need to Know

March 20, 2020

The world of credit is vast and, often, confusing. With this in mind, it’s easy to fall prey to circulating credit myths that might start or continue your credit journey in the wrong direction. Today, we’re tackling common credit myths and debunking them so you can rest easier as you build credit.

3 common credit myths

1. The effects of bad credit never go away

Bad credit or a bad credit score (usually a score below 580) affects borrower’s viability with future loans. In short, a low credit score tells banks and lenders that you have either neglected to make payments on your loans, neglected to make your payments on time, or simply cannot fulfill the agreement you entered into with your provider.

The Balance reports negative items listed on your credit report like late payments, debt collections, charged-off accounts, and bankruptcy are usually listed for seven years—meaning, at some point, some negative distinctions/labels can go way. Other negative items like chapter 7 bankruptcy or unpaid tax liens, however, can remain on your credit report for longer.

2. A credit check will affect your credit score negatively

Not every credit check is the same. Credit checks can be separated into two different categories, soft and hard. A soft credit check has no impact on your credit score whereas a hard credit check has the power to affect your credit score by one to five points. This change in your score is not one that will last forever, however. A hard credit check can be most detrimental if you have a credit score that is on the cusp or bordering the difference between a good score, an average score, or lower.

So, what makes for a soft versus hard check on your credit? Soft inquiries tend to take place when you receive a credit card offer by way of mail, when you choose to check your own credit, and/or if a potential employer is performing a background check. Hard inquiries tend to be performed by lenders before they grant you a loan, when you elect to apply for a credit card, or apply for a mortgage.

3. It’s better to not have a credit card

Whether you choose to open a credit card or not is a personal choice. If you’ve found yourself questioning whether or not you really need a credit card, it may be a good idea to assess your goals, and consider whether you’ll need a loan in the near or distant future.

The benefits of having a credit card are the convenience of paying for your purchases over time, credit card rewards, and protection from fraud or fraudulent activity. The disadvantages of having a credit card can include high-interest rates on your repayments, annual fees, and general credit mismanagement on the part of the credit cardholder. With this in mind, it’s not necessarily better or worse to have a credit card in the general sense. Opening and choosing a credit card is a personal choice that you’ll have to make for yourself.

For example, if you hope to take out a loan for a mortgage, car, or larger purchase, it could be advantageous to have a positive lineage of credit history that shows lenders you’re able to handle having a line of credit and that you can make payments on time and in full. Moreover, don’t take this myth for face value, assess your situation, and decide from there.

When it comes to credit, you’ll want to make sure you do your research. Not every piece of information touted as fact rings true. The best way to navigate your credit journey is to consider your personal financial situation and goals. Doing so will help you asses whether a credit myth applies to you or not.

Interested in more credit card tidbits, facts, and strategies?

Take your credit journey to the next level by taking a look at our blog! And don’t forget to check out our latest blog post on how to pick your credit back up after credit card delinquency!

Illinois Lending is your provider for loan services that are quick, easy, and work best for you. Learn more about our services and apply online today!

Share on
1419

Apply online in minutes and get a quick decision!

We’re dedicated to helping our customers. That’s why we offer easy loan applications,
speedy customer service, no hidden fees, and affordable payments.
Apply Now