Common credit score myths — and what you actually need to know before applying for financing.
Credit is a pivotal part of how our economy functions, yet so many people are clueless as to how it works. Operating under misconceptions can be incredibly dangerous — particularly when your false beliefs affect your ability to take out a loan. We've put together a list of some of the most common credit score myths and how to avoid them.
Myth vs. Reality
Understanding how credit really works puts you in a stronger position when you apply for financing.
Studies have shown that a significant number of credit reports contain errors. If your report includes inaccurate information — especially negative items — you could end up paying more interest than you should. Reviewing your credit report regularly is one of the simplest ways to protect your score.
This is one of the more pervasive myths, and thankfully, it is false. There are two types of credit inquiries: a soft inquiry and a hard inquiry. Soft inquiries (such as checking your own credit) do not hurt your score, though the fact that you requested it will be added to your report. You can check your own credit reports as often as you want without any ill effects on your credit score.
Hard inquiries can affect your score, but not all inquiries are treated equally. Credit scoring bureaus realize that it's important for customers to shop around and find the best interest rates before committing to a car or home purchase.
As long as your mortgage, auto, and student loan inquiries fall within a 14-day span, they will all be lumped together and viewed as one inquiry. There are some newer scoring models that extend that to a 45-day span. This means you can compare lenders without worrying that each application will significantly damage your score.
Our team can walk you through your options and help you take the next step toward approval.
