Many Americans believe credit myths. MoneyTips would like to debunk them.
In a June survey, we asked 410 Americans to rate as True or False some statements about credit. We threw in a few softballs. But when it came to four important credit statements, less than 6% answered them all correctly. In fact, more people got them all wrong (7.1%) than all correct (5.9%)!
If you like, you can quiz yourself about these important credit concepts, and then look below for the answers.
TRUE OR FALSE: You do not need to carry a credit card balance in order to build your credit rating.
TRUE OR FALSE: When a married couple tries to get a mortgage, their joint credit score is used.
TRUE OR FALSE: If I look at my credit score too often, it actually lowers my score.
TRUE OR FALSE: You can improve your credit score by closing unused credit cards.
Ready for the answers?
Believe it or not, all of these statements are false except for the first. Don't feel badly if you didn't do well. Only 5.9% of the people surveyed got all four correct, while 24.6% got three of them right. That means nearly 70% failed the test! 39.5% got half the questions right, 22.9% got one right, and 7.1% missed all four despite having a 50-50 shot at guessing right on each of them. Let's examine each statement.
This is true, but nearly half the people surveyed (45.9%) thought that they did need to carry a balance in order to improve their credit. However, paying all of your bills on time is what's important, not carrying a balance.
"I think the worst misconception people have, particularly as it pertains to credit, is this idea that you have to owe money in order to build your credit rating, and that's not true," says Bankrate.com Chief Financial Analyst Greg McBride. "You can build your credit score very effectively by opening up credit cards and then paying the balance in full at the end of the month. You do not need to carry a balance – particularly at a high interest rate – in order to build your credit rating."
To be honest, no matter how close you are to your partner, you do not share a "joint credit score."
"Another myth that we've come across is that when you get married or you have a partner, that your credit histories will be merged, and they won't," reveals Experian Director of Public Education Rod Griffin. "Everybody in the US has their own credit history, so we don't merge the two. But if you apply for joint credit, both are going to be considered. So, it's hugely important to take care of your credit history, especially if it's struggling a bit, help build it back up."
Yet nearly 3 out of 4 people (73.9%) surveyed thought this was true. This was the statement that people got wrong the most.
More than 3 out of 10 (31.7%) of the people surveyed thought this was true, but they were wrong. Not only will Credit Manager by MoneyTips let you look at your score and credit report for free within minutes, but taking such action will not lower your score at all. In fact, you could even find a mistake on your credit report, and fixing that could raise your score!
One of the top credit myths, according to Personal Finance Expert and Author Jordan Goodman, is that "if you look at your credit score, it's going to hurt it. Okay, it does not affect it at all to look at your credit score. You can look at it twenty times a day, it would not affect your score at all. That's what's called a soft inquiry. What does hurt your credit score is a hard inquiry where in fact you are applying for credit. And you don't want to do a bunch of those at the same time."
Once again, nearly half (49.3%) of people surveyed got this wrong.
"When you have a long-standing trade line, which is what a credit card is considered on your credit report, and you cancel that card for whatever reason, your score will actually go down as a result," explains National Financial Educators Founder and Chief Education Officer Adam Carroll. "Because one of the main impacts on your credit score is the length of your credit history."
"These are facts and myths about credit that consumers should know," said Marc Diana, CEO of MoneyTips. "Not knowing about credit basics could cost you thousands of dollars in interest, and may even keep you out of the job or home that you desire."
To learn more about credit, download the free credit eBook 9 Simple Ways To Raise Your Credit Score. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.
This article was provided by our partners at moneytips.com.
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