Credit Score Truths You Need To KnowApr 18, 2018
Has high credit card debt or a few missed payments caused your credit score to take a recent nose-dive? Are you unsure of what your credit score actually is and why it’s important that you know it? There are a few basic things you should know about your credit score in order to debunk those myths and help you make informed financial decisions, so your money and debt goals can become a reality.
As discussed in this podcast episode, here are a few credit score truths you need to know:
- You can (and should) know your credit score
Many people assume that checking their personal credit score will actually cause damage to their score. This is not true. Checking your own score is considered a ‘soft hit’ and, as such, does not negatively affect your score in any way.
It’s indeed a good idea to check your credit score from time to time. Not only does it allow you to see where you stand, but it also provides an opportunity to take steps to improve your score if you find it’s a little lower than you expected.
There are a few free ways you can access your own credit score to see where you stand. Your bank may offer this service free of charge, or, alternatively, you can access a free report once a year from TransUnion or Equifax.
- Your credit score will not affect your partner’s score
As our LITs explain in the podcast, if you do not have joint debt with your partner, your credit score will not negatively affect your spouse’s credit score. It’s only if you carry mutual debt, such as a joint credit card account, or a mortgage, that both of your credit scores will be affected, if there are missed or late payments tied to those accounts.
- A high credit card balance can hurt your score, even if you make the minimum payments
You may also not be aware of the negative effects high credit card balances can have on your credit score. One of the factors used to determine your score is credit utilization, which refers to the ratio between your credit limit and the amount of credit used. If your debt is close to the limit, it could adversely affect your score.
- It’s never too early to teach your teen about credit and debt
Although you may be reluctant, don’t wait to introduce the concepts of debt and credit to your teen. Start with a joint credit card that you have access to in order to monitor their payment reliability and help them build a good credit history. Remember, it’s very important to monitor their spending behaviours and provide guidance along the way. Teach them how it works and why they should always pay their credit card bills in full each month in order to learn the importance of managing their debts.