Credit Score Myths: Clear these 5 misconceptions now to avoid financial harm
Low Credit Score Means No Loan Approval
Many believe a low credit score guarantees loan denial. While it can affect your credibility, banks consider other factors, such as income and financial history. You can still qualify for a loan by presenting proof of increased income or opting for a joint loan, though higher interest rates may apply.
Using Credit Cards Will Hurt Your Credit Score
There's a misconception that using credit cards sparingly is necessary to maintain a good credit score. In reality, it’s recommended to use up to 30% of your credit limit to maintain a healthy credit utilization ratio. Spending more than this is acceptable as long as you repay it on time.
Checking Credit Score Lowers It
Checking your credit score frequently does not lower it. Regular monitoring keeps you aware of your score’s health, allowing you to address any dips before they affect loan eligibility.
Cheque Bounces and Credit Score
A bounced cheque doesn’t directly affect your credit score. As long as you continue paying loans on time, your score won’t suffer even if a cheque bounces due to insufficient funds.
Multiple Credit Cards Hurt Credit Score
Having multiple credit cards won’t harm your credit score if you manage them properly. Timely repayments and responsible usage can even boost your creditworthiness by increasing your available credit.