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What's holding you back from building a strong credit score?

There are stories we’re taught from a young age that stay with us throughout our lives. For instance, some people believe health and strength are only improved through physical strain and/or pain, living strictly by the adage “no pain, no gain”. The same is true for financial health, there are many myths that serve as a roadblock to building a strong credit foundation.

Here are five longstanding credit myths and how each might stall your efforts to improve your credit.

Myth #1 - You have only one credit score that is reported by every agency

The myth “you can target your fat burn”, is as problematic and false as the idea that you only have one credit score. The similarity between these myths is the limiting idea that concentrates on a singular point of focus. In truth,  everyone has more than one credit score as there are multiple reporting agencies and decision models applied by lenders.

Myth #2 - Monitoring your credit report can result in lowering your overall credit score.

Consistent monitoring of your credit report is no more harmful to your credit score than daily monitoring of your weight is to your overall health. For instance, when you get into the habit of regularly weighing yourself when attempting to lose weight, you have the opportunity to create workout habits and adopt eating behaviors that reflect positively when you step on the scale. There is no negative effect of personally monitoring your credit score, as it’s considered a “soft inquiry”, unlike the “hard inquiry” that is commonly associated with applying for credit accounts and loan applications.

Myth #3 - It’s difficult to build a credit history

Building your credit history isn’t difficult, but you must be consistent in your efforts. Take the example of wanting to get in shape, some believe that you have to spend hours in the gym to get results. However, many see results with changes in eating behaviors and consciously making efforts to be more active without starving or living at the gym. Building your credit history requires deliberate actions, but it’s not difficult if you create a plan and commit to making smart money decisions. Read our recent post “Build Your Credit Score” to learn more.

Myth #4 – Paying off your credit cards monthly, hurts your score

When you stop weight training regularly, your muscles won’t turn to fat. Though they might loss mass, any fat gains you experience are most likely tied to your consuming the same amount of calories as you were when you working out. When you regularly pay down your debt, you are not hurting your credit score. In fact, you are proving your creditworthiness which might result in increased credit limits which lowers your credit utilization.

Myth #5 – You can’t get approved for loans when you have bad credit

Bad credit is not the end-all-be-all of your credit journey. Similarly, focusing on crunches and sit-ups will not get you six-pack abs. Those exercises can help contribute to your end goal, but by themselves they do not create envy-worthy abs. Though bad credit can influence the loans you are qualified for, it’s also just part of a mix of items that are used to evaluate your creditworthiness. If you have bad credit and apply for a loan you will most likely be required to pay a higher interest rate and/or larger down payment.

We encourage you to take advantage of the Fair Credit Reporting Act, which allows consumers to receive one credit report from each reporting agency (Equifax, Experian and TransUnion) free of charge. Visit AnnualCreditReport.com to access your credit reports. Additionally, if you are experiencing credit issues, make a plan of attack that allows you to take steps to improve your score.