1. Myth: You need to carry a balance to boost your credit score.
If you pay your debt in full and on time, you can have excellent credit. Lenders want to see that you use credit responsibly, not that you carry a balance.
Carrying balances from month to month and incurring interest does not help your score. The credit score rewards an open and active account in good standing with a zero balance.
- Fact: Medical debt under $500 should no longer be in your credit report.
Nearly 1 in 5 U.S. households have reported having some form of overdue medical debt, according to the Consumer Financial Protection Bureau.
Last April, the three major credit bureaus — Equifax, Experian and TransUnion — announced that medical collections with balances of $500 or less would no longer appear on consumer credit reports.
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When medical collection data is removed, people’s scores can jump significantly — 25 points, on average — in the first quarter after their last medical debt is removed from their credit report, according to the CFPB.
If your report has a medical collection under $500, you should dispute that information with the credit bureau. The CFPB notes that the change does not include credit card collections, even if you used your credit card to pay for a medical expense under $500.
3. Myth: You need to keep your credit utilization under 30 percent.
Thirty percent of your credit score is made up of amounts owed or credit utilization, which is how much credit you’re using compared with your total credit limit.
You’ve probably heard that consumers should have a credit card utilization rate of no more than 30 percent. So, for example, if your credit card limit was $1,000, you should keep your balance to $300 or less. This suggested guideline would apply for each individual credit card and the overall utilization for all your cards.
If you’re using a high percentage of your available credit, or you’re close to maxing out your credit cards, that can have a negative impact on your FICO score.
But the truth is that 30 percent ceiling isn’t a hard-and-fast rule. It’s a benchmark used to discourage consumers from overextending themselves.
If you’re aiming for a super high credit score, use a low percentage of your available credit. Low credit utilization can push you into an excellent credit range.
As of last April, the average revolving credit card utilization was 4 percent for those with an 850 on the FICO Score 8 credit-scoring model.
4. Myth: You should never close a credit card account.
If you have outstanding credit card debt, wait until you’ve paid it off before closing the account. If you’re carrying balances and you close an account, it may cause your overall credit utilization rate to increase, which in turn can result in a dip in your credit score.
There are good reasons to close a credit card account. The annual fee may be too high, or you’re trying to control the temptation to spend.
If you’ve established a long history of responsible credit management by, among other things, paying your bills on time and keeping credit card balances low, you’ll probably see minimal impact to your score when closing an account.
By the way, an account in good standing with a history of on-time payments will remain in your credit files for up to 10 years from the date it was closed.
5. Fact: Updating your income doesn’t negatively impact your credit score.
Although a lender will use income to grant credit, your earnings are not a factor in determining your credit score.
So, you don’t have to be concerned about providing updates about your income.
Credited to : https://www.washingtonpost.com/
