5 Credit Score Myths (How FICO Actually Works)

TL;DR

Understanding credit score myths debunked.

Transcript

so hannah and i are in the midst of the home buying process yes we are moving out of the rv after three years full-time into an actual house we're really really excited and if there's one thing that i've learned throughout this process it's that having a really good credit score has been extremely beneficial and given us a lot of flexibility which ... Read More

Key Insights

• 💯 A good credit score offers flexibility and benefits in various financial transactions.
• 💯 Different credit scores cater to specific industries and products.
• 💳 Hard credit inquiries can temporarily lower credit scores.
• 💯 Carrying debt is not necessary to maintain a good credit score.
• 💳 Credit scores are calculated based on payment history, credit utilization, credit history length, new credit, and credit mix.
• 💳 Closing accounts can impact credit scores based on credit utilization ratio and credit history length.
• ⏳ On-time payments, low utilization ratio, and credit history length are key factors in improving credit scores.

Questions & Answers

Q: Why is having a good credit score important?

Having a good credit score provides flexibility in borrowing, lower interest rates, and approval for various financial activities like buying a house or getting insurance.

Q: How do different credit scores impact financial decisions?

Different credit scores cater to specific industries and products, influencing loan terms, interest rates, and approval chances for different financial activities.

Q: How do hard and soft credit inquiries affect credit scores?

Hard inquiries, like applying for loans, can temporarily lower credit scores, while soft inquiries, such as checking your own credit, have no impact on scores.

Q: Is carrying debt necessary to maintain a good credit score?

No, carrying debt or paying interest is not required for a good credit score. On-time payments, low credit utilization ratios, and credit history length play significant roles.

Summary & Key Takeaways

• Having a good credit score is beneficial for flexibility in financial endeavors.

• Different credit scores exist for various industries and products.

• Checking your credit has different impacts based on hard or soft inquiries.