The credit score is one of the most essential ways of dealing with credit eligibility to get approval on a line of credit. It is one of the most talked-about aspects in terms of credit eligibility by the loan providers and financial institutions. When you submit an application for a loan or credit card, your credit score is the very first thing that is judged by banks or financial institutions.
It is very important to understand the fact that a credit score is the most essential aspect of borrowing and certainly needs a lot of attention. However, there are a lot of myths and fallacies that prevail. It is one of the most rumored factors and there is a lot of false information here and there. Remember, any wrong information will lead to a low credit score and you would certainly not want that to happen to you. It is important to understand the reality behind the fallacies that we often believe to be true.
A credit score has a good number of fallacies that surround it. You must get the right facts so that it is easy to start a smooth financial journey. To get into depth on facts related to credit score check, keep reading:
Top fallacies related to credit score
A low credit score permanently damages your score
There is nothing called permanent damage if the individual is working on it. Even bankruptcy can be recovered with years of good financial habits and records. The fallacy that credit score creates permanent damage is true until you work for it. There are various factors and activities, like making payments on time, not opening too many new accounts, having a good credit utilization ratio, credit age, no overdue or outstanding charges, and having the right credit mix. With these activities, you can completely change your score for the better and best with time. Remember, it is not an overnight escape and will take time.
A credit score decides whether you get credit or not
A credit score is the first thing that is checked by banks and financial institutions. It certainly represents the credit record and credit background of individuals and it helps financial institutions gain information about finances. However, a credit score is not everything. There are other factors as well that play a vital role, like income, employment, and security. A loan provider runs a complete check, so you need to take care of all the factors and not just your credit score in particular.
Your credit score invades your personal space
A credit score is a numerical analysis of your credit journey. It only represents the financial activities and records from the past to the present. There is no personal information or anything related to the individuals that are shared with the loan provider. The credit score is only limited to financial information and nothing else. There is no chance of any personal information as it is limited to financial records only for the approval of loans or credit cards. You can be best assured that you are not sharing your privacy or integrity with the credit card bureaus.
Your credit score drops when you apply for new credit
It is not a completely wrong statement, as when you apply for new credit, your credit score drops a little. This is more evident when an individual applies for multiple credit options within a short span of time. It is important to understand that when you apply for multiple credit cards within a short time span, it does not speak well about your credit health. Again, if you apply for credit after a long gap and have a good track record, it will not affect your score much apart from the hard enquiry. A hard enquiry is a reason behind a low credit score when applying for credit. Whenever you apply for credit, the loan provider runs a credit check and it will dip your score a little.
A good degree means a good credit score
This is a complete fallacy that goes around credit scores. There is no link between a credit score and a degree. Education has nothing to do with it, but again, when you acquire a degree and start working with a good salary, that helps you with easy job approval and various other processes. Financial stability is attained, and that is not directly related to credit score. People with a good income can also have a low credit score. There is no interdependence.
A credit score check is necessary to understand where you stand financially. The fallacies regarding credit scores are not justified, as individuals must stay updated with the facts and not rumors or fallacies. A credit score is a very important financial aspect of borrowing. Hence, it needs to be in the right place.