“Looking at your own credit report or score isn’t like sneaking a peek at your notes during a test,” writes Credit.com’s Leslie Tayne, “you’re allowed to be in the know.”
Yes, when you creditor pulls your credit report, it counts as a “hard inquiry,” which can result in a minor, temporary ding to your credit score, but when you look at your own report, that’s considered a “soft inquiry,” that doesn’t impact your numbers and only serves to give you helpful information about your creditworthiness.
Some other myths that Tayne has come up against:
• Closing a lot of credit cards will improve my credit score.
It’s only bad to have a lot of credit cards if you’re in debt on those cards. Merely having them doesn’t hurt your credit, and closing a bunch of them at once could come back to bite you.
“One of the major factors of your credit score is your debt-to-credit ratio,” explains Tayne, “and closing too many cards at once can drastically change your ratio, which can cause your score to drop.”
So imagine you have three cards with a total of $15,000 in credit, and you owe $3,000 all on one card. If you close out the two unused cards, you may have significantly increased the debt-to-credit ratio without incurring any more debt.
If the idea is to remove the temptation because you know you will use those cards, then the ding to your credit score may seem worthwhile. It might be better to keep those cards in a place where you won’t use them or have ready access to the card numbers, so that you’re not charging more but you’re also not hurting that debt/credit ratio.
Tayne advises people who insist on closing card accounts to shutter one and then check their credit report a short time later to see the impact.
• My income affects my credit score.
Someone making $40,000 a year can have the same bad credit as someone making two or three times that amount. Your income isn’t included on your credit report, so the only way it affects your credit is by affecting your spending habits and your ability to make payments.
So if you get a new job that doubles your pay, your credit score won’t necessarily increase — unless you use that extra money to pay down your debts. But if you decide that you’re making more money so you can afford to charge more to your credit cards, it could hurt your credit score if you let that debt pile up by making small payments.
• How I manage my bank accounts, investments and other personal finances impact my score.
“Anything pertaining to your bank accounts, investment accounts or transactions made in cash have no effect on your score,” explains Tayne. “That said, overdrafts can have an effect if your bank provides you with a line of credit in the event that you overdraw – then that line of credit may show up on your reports.”
Tayne advises that you make sure any closed accounts are truly closed and that no unpaid balances or fees remain, as those can continue to pile up and end up on your credit report even though you thought your account was done with.
• I don’t have to worry about my credit score because my significant other has a good score.
“Do you not have to worry about your health because your partner is in good health?” asks Tayne. “Your spouses’ good credit score is not a shield you can both hide behind. And contrary to what some may think, credit scores only reflect an individual’s credit – so your spouse’s good credit is not counted as yours.”
But while you might have separate credit reports, if you apply for a loan together, the lender will check both your credit reports.
And since, sadly, not all marriages last forever, you might have to rely on your own credit at some point in the future. No point in letting it fester just because you’re married to someone with decent credit.