Debunking 3 Common Myths About Your CreditOctober 22, 2020
Every major financial decision you make in your life reveals your sense of responsibility for handling payments. It plays a pivotal role in your financial life, one that influences various factors such as your premiums, loans, and can even determine the cellphone plan suitable for you.
Seeing its importance, debunking any myths surrounding your creditworthiness is crucial if you don’t want any misconceptions hurting your score. If you want to have a clear understanding of how your credit score works, consider the myth-busting list below:
Myth #1: Your Income Affects Your Credit Score
It’s an easy mistake to make; seeing as your income is the bread and butter of your life, it makes sense to correlate it with your credit score. However, what you earn every month does not affect your credit since FICO scores are typically calculated by looking into your payment history, amounts owed, length of credit history, new credit, or the occasional credit mix.
While it’s true that lenders consider your income in their approval decision, your salary has no link whatsoever with your credit score.
Myth #2: Minimum Payments Protect Your Credit Rating
Missing loan payments can hurt your credit score by a significant margin, so it’s logical to think that you can escape the low rating by opting to make the minimum contractual payment when seeing your debts off.
Keep in mind that the number one factor lenders will consider is your ability to give back your borrowed money smoothly, but falling back to minimum payments a year can signify underlying cash flow problems on your end.
If you’re looking for ways to liberate yourself from debts, you can get some local counseling regarding the possible solutions you can use to set a realistic repayment plan that suits your budget.
Myth #3: More than one Credit Cards can Improve Your Credit Score
It’s easy to think that juggling multiple credit cards means you have more options to pay off your debt, but it only signals that you will likely go deeper into a debt cycle as you use one card to pay the other.
This can bring down your credit score and make it more challenging to borrow money in the future, even if you don’t owe much on your credit card.
The Bottom Line: Busting Popular Credit Myths to Clear Your Path For Your Loan
Navigating through your credit history is a convoluted journey, one that makes it tricky to tell fact from fiction. While the guide above should dispel some credit myths, it all boils down to the most important takeaway: your credit score represents your financial responsibility, which means it has the biggest impact on your chances of getting approval for your loans.
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If you’re looking for fast, easy loans in South Africa, we’re an ever-evolving online loan broker that can bridge the gap and help you build an impressive credit history. From affordable loans, bad credit loans to emergency loans, we can provide the coverage you need to obtain your goals.