With home buying season looming upon us, a lot of folks are digging into their credit score and history to try to make some last minute adjustments.
Truthfully, you should always be focusing on building your credit, but hey, sometimes life gets in the way.
There are a lot of credit score myths floating around out there that can leave you wondering if you should even have credit at all.
Well, today I’ve got Amy Johnson on as a guest blogger to help you out with that. You’re up Amy.
First, let’s explain the difference between two key services you see out there in the credit industry.
Credit monitoring is one service that can help you figure out if your account is being abused. It is also a way for you to find out if there are other anomalies on your accounts.
Credit checks, on the other hand are required for employment and bank applications. We define which types of credit checks actually affect your credit score and which don’t next.
One of the most important things in one’s finances is credit worthiness. This is why a person who is looking to eventually take out a mortgage, auto loan, or even just a couple of credit cards, does well to ensure that his credit score remains above par.
Credit monitoring is a key tool to be able to check whether anyone is abusing your credit accounts, which can lead to your credit score plummeting into bad credit.
There is a myth flying around that keeps people from making the most out of credit monitoring, however: it is widely thought that credit monitoring can and will affect one’s credit score.
Four Credit Myths That DO NOT Hurt Your Credit Score
1. Credit monitoring hurts your credit score: There is no reason to believe that using credit monitoring on your accounts will hurt your credit score. Rather, it is actually a tool that will help you understand the entries on your credit history. It will also show you if someone else may be using your accounts.
2. Your spouse’s bad credit will drag down your credit score: In all truth, one SSN is equivalent to one person, so there is no “joint credit history.” Even when both of you apply for joint accounts, entries on the joint accounts will only harm or boost your credit scores as individuals.
It’s like having your own transactions that go into each of your credit reports as individuals. If you’ve paid all the balances on your joint accounts on time and used these joint accounts prudently, it will boost both of your credit scores. If you’ve both misused your joining accounts, then these joint account entries will hurt an otherwise good credit standing account of one or both spouses.
3. Not paying your rent will hurt your credit score: Believe it or not, if you and your landlord don’t get along and you decide to leave the apartment without paying a cent of your last rental dues, it won’t go on your credit report. That is, unless, your landlord takes you to court, of course. The moment he does and judgment is served in his favor, say hello to a plummeting credit score.
Note from Cody: While this may not go on your credit score until a legal situation ensues, if the unpaid amount ends up in collections, it can certainly on your report quickly. Would be creditors can also call your landlord to see if you’re a deadbeat or not. I’d be careful with this one.
4. “Soft Inquiries” hurt your credit score: Run-of-the-mill credit checks, as in employee background checks with new job applications, do not hurt your credit score at all. When you check your own credit report at the end of every fiscal year, that is also considered a “Soft Inquiry.” Suffice it to say, when you monitor your credit, it is a “safe activity” for your credit score.
Compare this to “Hard inquiries” such as those initiated by banks and others that are attempting to issue you credit accounts. Don’t rack up too many of these in a short period of time. This is why you need to space out your bank and loan applications so that your credit score does not plummet.
Note from Cody: If you’re looking for some more ways to hack your credit score, check out this past article, which is one of the most popular on Academy Success.
Amy Johnson is an active finance blogger who is fond of sharing interesting finance related articles to encourage people to manage and protect their finances.