Credit Myths: Busted, Part One

There are a lot of myths out there about what affects your credit score — enough for a two-part series.

Save the myths for your Classics course. Get the information you need to be a smart credit consumer right here.

Myth #1: Checking your own credit score is bad.

In the world of credit checks, there are soft pulls and hard pulls.

A hard pull, which happens when you give permission to a lender to check your credit (i.e. when you apply for a new credit card or loan), will drop your score by a few points.

A soft pull, which happens when you check your own score, will not affect your credit score. It’s important to know your number so, by all means, keep an eye on it!

UW Credit Union members can access their credit score and full credit report for free in Web Branch.

Myth #2: If I receive a credit card offer in the mail, my score will go down.

Credit card companies are eager to win new business from college students, so you’ll likely receive plenty of offers. If they have looked at your credit history, it’s been a soft pull, which leaves your credit score unchanged.

They will do a hard pull, however, if you respond to their offer and fill out an application. While you may be in the market for a credit card — and this is a good time to start establishing credit — make sure you are doing your homework and picking the right credit card for you before you apply.

Myth #3: Using a debit card will build my credit score.

Debit cards are not a form of credit — even if you select “credit” when making a transaction. Debit card activity does not get reported to credit bureaus so it will not affect your credit score.

Myth #4: Carrying a balance on my credit card will improve my score.

While it may seem intuitive that a higher balance on your credit card will build your credit, it will only hurt you.

First, it increases your credit card utilization rate, a key indicator in determining your credit score. Second, this move will become expensive over time because of the interest you’ll pay.

Long story short: plan to pay your credit card balance in full each month. And if you can’t afford your minimum payments, it’s time to ask for help.

Myth #5: Closing a credit card I no longer use will improve my credit score.

Closing a credit card will actually never improve your credit score. As a matter of fact, it’s probably going to hurt your credit score. Which is why it’s so important to research options and make sure you’re applying for a credit card that’s a really good fit for you.

That being said, if you have a card with an annual fee or a high interest rate that you no longer use, it might make sense to close the account or ask the card issuer to switch you to a card with no annual fee and a lower interest rate.

UW Credit Union offers several different credit cards with no annual fee that may be a good option for you.

We’ve only brushed the surface of credit myths. Stay tuned for part two, where we cover everything from when you need to think about your credit score, who can see your credit score, and some unexpected things that could affect your credit score.