How Myths Can Impact Your Credit Rating

How Myths Can Impact Your Credit Rating

Myths appear in various cultures and so as in industries too. Certain myths may be true while others are completely made up. The same goes for credit history. Some myths may help, but others can hurt your credit rating too much that might be hard to reverse the effect.

It is true that a healthy credit rating can help you in the future. Here are the credit rating myths and the real deal about them.

Opening new credit card accounts can increase your credit rating.

A lot of people believe that having a lot of credit cards can improve their creditworthiness in the eyes of the banks and money lending companies. However, if you apply for a lot of credit cards at the same time, this can hit you more on the negative side. This is because more application for credit means there will be more inquiries made to your credit history. The more inquiries you will get, the lower it can pull your credit rating.

Closing old accounts will increase my credit score.

This myth is actually dangerous. Closing off old accounts can possibly diminish your credit score. This can shorten your personal credit rating since you will have less credit to avail. The duration of your credit rating shows if you’re a seasoned customer, it shows how long you have been good at balancing your credit. If you close your account, you are giving up your long history of creditworthiness. Add to that, you will have less available credit.

Paying too early can boost your credit rating.

While paying way ahead of your deadline is good, it does not necessarily increase your credit rating. Whether you pay earlier or you pay just in time, it will just have the same effect on your credit score. However, paying late can drag your credit rating.