Debunking 4 Myths On Building A Better Credit

Debunking 4 Myths On Building A Better Credit

There is no quick fix to building a better credit. The only way to increase your score is by making timely payments and being financially disciplined. You should only apply for credit when you think you have the ability to repay the same on time. Many people believe in certain myths about building credit; however, they do not help you achieve a higher score. We debunk some of these myths here.

You can deal with hard inquiries on your report
There can be two types of inquiries on your report, soft and hard. A hard inquiry can be generated when you put forward a loan application and the lenders look at your credit report. Many consumers believe that if they look at their credit report every day, it will lead to soft inquiries and reduce the number of hard inquiries. However, there is no connection between the two. There is no limit on the number of inquiries you can have on your report and there is no way you can change the number of hard inquiries on your report.

One should opt out of offers for credit cards
Most have a myth that opting out of a credit card offer will lead to less number of inquiries on their reports. However, these will be soft inquiries and they will not have an impact on your credit score. You will have to face hard inquiries when you apply for a loan and these will affect your credit score. You can opt for the offers but it is not going to help you build any credit.

Closing old accounts will help you improve the score
Many consumers believe that if they close all of their old accounts, it will help them to improve their credit score. Instead, this could leave you with a small amount of credit available. In order to have a higher credit score, you need to have your credit length running for years. The length of your credit will show that you are a responsible borrower and make it easier for you to borrow money.

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Multiple accounts can improve your score
Many believe that opening multiple accounts can prove that they can handle credit well, and this will raise the score. Instead, it actually has the opposite effect. The lenders will wonder why you need a huge amount of credit and why do you have so many accounts opened under your name. It shows risk and there will be hard inquiries with every loan application, which will reduce your credit score, and the lenders will believe that you are desperate for finance.

These myths will not allow you to build a better credit. Keep these myths in mind when you apply for a loan or a credit card. It is essential to know what lenders may assume about your credit history when you make decisions based on these myths. You need to be aware of the implications of your actions and how they would affect your score. In order to increase the score, be financially responsible and keep your expenses and credit in check.

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