The Most Common Misconceptions Around Building Credit Potential Homebuyers Need to Know
Building good credit is a key element in preparing to buy a home. But there are a lot of misconceptions out there around credit scores, how they work, and how to build and maintain a good one—misconceptions that could actually hurt your credit and make it harder to buy a home.
Myth #1: You should close your credit cards once you pay them off. While it might seem like a good idea to close a credit card once the balance is paid off (that way, you won’t accrue a new balance), it can actually hurt your credit—since closing a credit card can shorten your credit history, which makes up about 15 percent of your total credit score.
Myth #2: An occasional late or missed payment won’t hurt your credit score. Think paying late or missing a payment every once in a while isn’t a big deal? Think again. Your payment history accounts for a whopping 35 percent of your credit score—which means that making your payments on time is an absolute must to build and maintain good credit.
Myth #3: Getting a credit report lowers your credit score. In order to build and maintain credit, you need to know what’s going on in your credit report. But many people believe that requesting a credit report will ding their score, preventing them from accessing the information they need. However, this isn’t true; getting a credit report from one of the primary reporting agencies is considered a soft inquiry—and won’t impact your credit at all.
So, what does this mean for you? Understanding the common myths around credit will help you avoid making mistakes while building your credit—which can put you in a better position to successfully purchase a home.
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