Credit Score Myths Homebuyers Should Know About

Dated: 05/12/2017

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Credit Score Myths Homebuyers Should Know About

Do you know your credit score? You should, especially if you’re buying a house! Ranging from 300 to 850, your credit score is one of, if not the biggest deciding factor in getting approved for a mortgage. The higher your score, the lower your interest and therefore the less you pay.

Credit scores were once mysterious and difficult to come by, usually the realm of bankers and mortgage brokers. But now, thanks to the internet, there’s no reason you shouldn’t know your credit score! Web sites like Credit Karma and some credit card providers now give you free access to your credit score.

Even then, it’s not always obvious how it works. Here are some popular myths about credit that we can debunk!

Myth 1: Checking Your Score Hurts Your Score

Checking your credit score is called an inquiry. When you do it – or when some utilities and rental companies do it – it’s called a soft inquiry. This does absolutely nothing to your credit score. When your credit is checked for the purpose of a loan, like a credit card or mortgage, that’s called a hard inquiry, and it does have a slightly negative effect on your credit score. It typically corrects itself in under a year, but you shouldn’t apply for too many lines of credit at once. Which brings us to…

Myth 2: Having Too Many Credit Cards is Bad

Credit cards are tools, pure and simple. Like any tool, they can be used improperly. In fact, having a lot of credit can actually help your score because of a thing called credit utilization. The largest factor in your credit score, it’s a measurement of how much of your available credit limit you’re using. The more credit cards you have, the higher your credit limit. Having a high credit limit and not using it is effectively being trusted with financial nuclear codes. Which brings us to…

Myth 3: You Should Always Leave a Small Balance on Credit Cards

Many people see leaving just a little on a credit card – under $100 – as a gesture of good will towards the credit card company. The truth is that they don’t care, and in fact this will actually increase your credit utilization, lowering your credit score.

Myth 4: Paying Bills On Time Increases Your Score

If you’re already paying bills on time, keep doing it! It will keep your credit score from going down. However, maintaining existing good behavior will not increase the score. This factor in your score is measured as a percentage of bills paid on time, and you can’t go up from 100%. But if you miss a few and then correct things, you’ll creep back up to 99.9% over time.

Looking to buy a new home? We can answer your questions about mortgages and help you locate the Triangle home of your dreams! Contact Domicile Realty today and let’s get started.

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Kristine Sours

A native of New Jersey, Kristine attended Rowan University with a major in Early Childhood Education. After teaching kindergarten for one year, she discovered her passion for real estate and subsequen....

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