According to one study, 38% of Americans have at least three credit cards.
However, even though it’s common for people to have that many credit cards, there are still a lot of misconceptions about average credit scores.
Thankfully, we’re here to help you out and clear up some of the confusion. Keep reading to learn all you need to know about your credit score and how it impacts you.
Many people avoid checking their credit scores because they are worried that it will hurt them. However, monitoring it can actually help you improve it.
When you check your credit score, it’s a soft pull. A hard pull is something that affects your score, but a hard pull happens when you’re applying for a loan, a new credit card, or some other type of loan.
If you’re checking it from an actual credit bureau and not a third party, your credit score should be okay. However, if you have a mortgage broker check your score for you, this will hurt your credit score.
Each credit union lets you check your credit score once a year, so you can check it three times a year when you utilize all of them. Many credit card issuers will also let you check your credit score for free.
Some people think that simply cutting your credit card will end it. However, you’ll need to do more than that. You’ll need to actually close your account.
Closing the card could lower your credit score though. They don’t measure risk by how much credit is available, but rather they check how much of it you’re using.
So if you have a card with a $5,000 credit limit that you don’t use and close it, you’ll reduce your credit limit by $5,000. This means you’ll be using more of your utilization, and your score will go down.
However, if the card is too big of a temptation, then you can close it.
A bad credit score doesn’t mean that you can’t apply for any more credit cards. There are plenty of them out there that are catered to people who have lower credit scores.
However, you could still get an exclusive card with a low credit score. You should check out cards like Total Visa or Capital One Quicksilver One. These are designed for people who have low credit scores, and if you use them correctly, you could improve your score.
Some people think they have to carry a balance on their credit cards to improve their credit scores. However, it has the potential to hurt you if you don’t pay it off on time.
It can quickly become expensive when you have to factor in interest. It’s also a waste of money to have to pay that interest off each month. Instead, make sure that you pay the statement balance each month.
Having a balance on your card will also hurt your utilization rate. If you have a higher credit card balance, then you’ll have a higher utilization rate as well, which can hurt your credit score.
You should consider transferring your balance to a different balance transfer card. However, if you can, it’s always best to pay it off as much as possible.
The three main credit bureaus don’t calculate the score the same way. They all generate them differently, so that’s why you might notice that your score varies slightly between each one.
You can request your free credit report once from the credit bureaus. The best way to figure out what your actual credit score is is by taking an average from all three of them. If they are dramatically different, you should look closer into your score.
Some people also think that their job and income will positively impact their credit score. However, it’s considered when applying for a credit card, but it’s not calculated into your credit risk.
Your income won’t be on your credit report, so it won’t impact the score. However, it will be considered when you apply for a loan or a new credit card.
You should consider your income and paycheck to ensure that you’re able to pay off your debt and credit cards when your bill is due.
Your credit score might not even indicate what your job is or even if you have one. However, your lenders will probably ask about how much income. You can also update your income and job when you have a credit card in the hopes of getting a higher credit limit, which could improve your score.
You might think that paying off your debt will help you erase all of it. However, there is still evidence of this debt on your credit report.
It will be on there for years, even if you pay it off. However, if you successfully pay it all off, then your account will show that you paid it off on time and responsibly.
If you aren’t able to pay it off, it will show that you missed payments or defaulted on the loan. The negative information will stay on your credit report for seven years. If you filed for bankruptcy, then it could stay on your report for ten years.
However, there are some debts that you can erase from your report, like medical debt.
According to one study, 45 million Americans don’t even have a credit score. Shockingly enough, everyone automatically has a credit score. You’ll need to take out a loan or have a credit card to start building your credit.
Many Americans don’t have enough credit history to have a credit score, so you should start smart. Some parents will even add their children onto their credit cards as an authorized users to help them start building credit.
To generate your own credit, apply for a loan or credit card.
Some people think that having an open credit card but not using it will automatically improve your score. It could, but it’ll depend on whether you have a balance on it or not.
If it’s paid off, then it can help to lower your credit utilization. If you still have a balance, it’s hurting your credit score, and you’ll rack up a lot of interest as well.
However, you may want to keep it open if it’s one of your oldest credit accounts. It could help show that you have a longer credit history, which is used to directly calculate your credit score.
Your credit card issuer may also close the card and account if you’re not using it. If you’re not careful, this can negatively impact your credit score. Using this card for small purchases can help keep those accounts open so that they don’t close.
Even closing an account could impact your credit score, so you want to be careful about which credit card accounts you close.
This can actually vary. Many people think that when they get married, their credit scores will merge with their spouse. However, they’re always individual, at least when it’s just a consumer.
When you’re applying for a new credit card with your spouse, you’ll have both credit scores considered. When you open a joint loan, you’ll both be able to see the benefits of paying everything off on time.
If you check your credit report and see that there’s false information on there, don’t ignore it! You can actually appeal to get it taken off so that it doesn’t keep hurting your credit score.
You can file a dispute for free and report the information. The credit bureau then has thirty days to investigate it and respond. When you report it to one bureau, they’ll also have to communicate it to the rest of them as well.
These are only a few things to know about the average credit scores, but there are many other myths around credit scores.
One of the myths is that you can’t apply for a loan if you have a low credit score. However, this isn’t true.
If you need cash quickly but are worried about your low credit score, we can help you out. Contact us today!