The Most Common Credit Score Myths
July 27, 2023
For something as key to your financial well-being as your credit score, it’s important to know which factors affect your score and how to improve it. There are a lot of misconceptions and misinformation floating around about how to build up your credit score. Read on to learn more and debunk some myths surrounding your credit score.
Checking My Credit Score Will Lower It
This is perhaps the most common myth about credit scores. Checking your score online yourself is considered a “soft inquiry” and will not change it. However, if you undergo a “hard inquiry” — meaning a lender pulls your credit score when you’re applying for a credit card, auto loan, mortgage, or something similar — it could temporarily lower your score.
Carrying a Large Credit Card Balance Will Boost My Credit Score
Large debt balances can hurt your score and become more expensive over time as you pay interest. The higher your credit card balance, the higher your credit utilization rate — the amount of credit you are using — will be. This can hurt your credit score. Ideally, you want to use less than 30% of your total available credit to help build a better score.
Closing a Credit Card Will Improve My Credit Score
This is also incorrect. Closing a credit card will not improve your score. Experts recommend keeping your accounts open. If you have specific circumstances where you need to cancel a card, there are alternatives such as switching to one without annual fees. In general, using your credit card while following good financial management habits is one of the best ways to improve your credit score.
OU Credit Union offers free virtual and in-person presentations on a variety of financial topics including understanding credit, what credit scores are, and more. Members with OU Credit Union checking accounts or loans also receive free access to their credit scores through our mobile app and ComputerLine® online service. Our knowledgeable employees are available to help you find lower-rate credit cards and loans for your needs. Visit our website at oucreditunion.org to learn more.
Tags: Tips and Tricks