A solid credit score is required to rent an apartment, buy a home or a car or move toward many other financial milestones. But given the complexity of credit scores — and how they’re calculated — fabrications, myths and half-truths about them exist. Maybe your mom told you that checking your credit score will cause it to drop. (It won’t.) Perhaps you think your income influences your score. (It doesn’t.)
Whether you’re taking the first steps on your credit journey, trying to repair your credit score or maintain your top-notch standing, it’s important to know the facts. Let’s bust a few of the most pervasive credit myths.
1. Myth: Checking your credit hurts your credit score
There are plenty of resources for checking your credit score and report for free. They include AnnualCreditReport.com, Mint, Credit Karma, your credit card issuer and your bank. All of them are free — and none of them should cause your credit score to drop.
There is a credit check that can lower — temporarily, usually — your score, however. When you apply for a mortgage or loan, you’re usually required to give lenders permission to check your credit. Referred to as a “hard credit check,” this type of inquiry can cause your credit score to dip. Most lenders will provide you with a copy of your report so you can see what they see.
2. Myth: A limited credit history will prevent you from obtaining a loan or mortgage
It’s a vicious loop: It can be hard to build credit without already having credit. But a limited credit history doesn’t automatically disqualify you from getting approved for some credit cards and loans.
Of course, having a long and consistent credit history and high credit score makes getting more credit easier. But you can still get some credit with little or no credit. If you’re an undergraduate applying for a federal student loan, for example, there’s no credit check and no cosigner required — even if your credit score is low. And many banks and lenders offer secured credit cards for borrowers with little or no credit history. This lets you put a deposit down that acts as your credit limit, even though you’re still using the credit card like normal and borrowing money from your issuer. Make sure your secured card reports to the major credit bureaus to showcase your responsible credit use.
Learn more about this: Five myths about your credit score and credit history