Most people know that having a good credit score is essential, but it’s not always easy to understand why. The truth is that your credit score isn’t just a number—it’s actually a way to predict how likely you are to pay your bills on time.
This prediction is based on many factors, with certain ones being more important than others. In this article, you’ll explore some of the most common myths surrounding credit scores so you can better understand what impacts them and what doesn’t.
As per professionals like SoFi, “For the most part, opening a checking, savings, or cash management account will not hurt your credit score.”
Table of Contents
Closing an Old Account
Does closing a bank account hurt your credit? Closing an old account does not hurt your credit score. It can actually help your credit score if the account was unused and you have kept your payments on other accounts in good standing. However, closing an old account that has a lot of debt associated with it could hurt your credit score because it reduces the amount of available credit on which you can borrow.
Having the Power to Pay
Having the power to pay is a factor in your credit score. Having a good credit score means you have access to loans and credit cards, which can help you achieve financial freedom. You should understand how lenders evaluate your ability to pay back loans or make payments on time by looking at your scores over time. If you always use a certain amount of available credit each month, then it’s likely they will see that as evidence that you always have enough money for what’s needed.
The Unemployment Rate
- The unemployment rate isn’t a factor.
- Your credit score doesn’t look at how much you make or how much money you owe. It only looks at the details of your past debt and payment history. So even if you lose your job, it won’t hurt your score as long as you pay on time each month and don’t take out any new loans.
- Credit scores aren’t affected by job changes—they only look at whether or not someone has been consistently employed over time (and whether they’ve paid their bills on time).
Opening a New Account
It is possible to open a new account and have it not affect your credit score immediately. It is because the bureaus only report on-time payments and derogatory information (bad news, like late payments or collection actions) once every six months. So if you open a new account, it won’t show up on your credit report for six months.
Where You Live
The location of your credit file is not a factor in your credit score. Credit bureaus don’t know where you live, if you’re a citizen or not if you’re married or not—and it doesn’t matter to them.
The only time location might be considered when applying for a loan is when you’re applying for an apartment in some cases. Some landlords may check the addresses of potential tenants’ rental applications against their own databases of renters who have made payments late before accepting an application from that person.
For most of you, the idea of owning a home is a dream that’s probably never going to happen. But even if you don’t ever get to own your own place, there are still ways to build up your credit score and feel confident about it. You just have to be smart about where you spend your money and how much debt you take on.
