5 Myths About Building Your Credit You Should Ignore

It’s hard to believe in an era where you can get a mortgage with no money down, but some people still cling to old-school myths about building credit. Here are five of the most common myths, and why you should ignore them if you’re trying to buy a home in Jasper.

5 Myths About Building Your Credit You Should Ignore

Check out these five common credit-building myths:

1. You have to use a lot of credit to build up your score
2. You should close your credit cards after they’re paid off
3. It’s okay if you make a late payment thanks to grace periods
4. You should always add your spouse to your accounts
5. You should pay a credit repair agency to boost your score

Here’s a closer look at each.

Credit-Building Myth #1: You Have to Use a Lot of Credit to Build Up Your Score

You may have heard that you should carry a balance on all your credit cards, but that’s simply not true. In fact, you don’t need to use your credit cards at all to build up your credit score.

Paying your bills on time – including utility bills, rent, and other debts – is one of the best ways to improve your credit score. So even if you’re not using your credit cards, you can still build up your credit by making sure you’re paying all your bills on time, every time.

Related: How much does a home appraisal matter?

Credit-Building Myth #2: You Should Close Your Credit Cards After They’re Paid Off

Once you’ve paid off your credit cards, it may seem like a good idea to close the accounts to avoid temptation. But closing your credit card accounts can actually hurt your credit score.

That’s because one of the factors that goes into your credit score is your credit utilization ratio, which is the amount of credit you’re using compared to the amount of credit you have available. So if you close a credit card with a $5,000 limit, your credit utilization ratio will go up, which could hurt your credit score.

Related: 5 big red flags to watch for when you’re touring homes for sale in Jasper

Credit-Building Myth #3: It’s Okay if You Make a Late Payment Thanks to Grace Periods

If you have a grace period on your credit card, you may think it’s okay to make a late payment every now and then. But the truth is, even one late payment can hurt your credit score.

And if you’re trying to buy a home, even one late payment could jeopardize your mortgage application. If you’re working on building your credit, it’s important to make all your payments – including credit card payments – on time, every time.

Credit-Building Myth #4: You Should Always Add Your Spouse to Your Accounts

If you’re married, you may think it’s a good idea to add your spouse to all your credit accounts. But that’s not necessarily the case.

In fact, if you have a good credit score and your spouse has a bad credit score, adding them to your accounts could actually hurt your credit score. It’s often best to keep your accounts separate.

Related: Do you really need a home inspector?

Credit-Building Myth #5: You Should Pay a Credit Repair Agency to Boost Your Score

There are plenty of companies out there that promise to boost your credit score, but the truth is, you don’t need to pay anyone to do it. There are plenty of things you can do on your own to improve your credit score, like paying your bills on time and maintaining a good credit utilization ratio.

If you’re trying to buy a home in Jasper, don’t let these myths about building your credit stop you from achieving your goal. With a little effort and patience, you can improve your credit score and get your mortgage.

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