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Myths That Could Tank Your Credit Score

Let’s face it! A Credit score can be mystery as there is a lot of misinformation among us. Yes, it is important to maintain a good credit score but still you cannot believe in everything what you hear. A good intention but a wrong step can push your credit score in a wrong direction too. There is a lot of information available about the credit score (even you can check the information portal of Mudra Home), but unfortunately, the consumers still hold the misconceptions about credit score.

So, now forget all the stories that you have heard before about the credit score and credit ratings. Even if not everything, but you should be willing to rethink what you know. After all it’s about debts, credit cards, credit scores and what you have heard till now is all about the old conventional intelligence which is peppered with misunderstandings, mispresentations and myths. Credit is a tool like any other tool that we use. It’s neither good nor bad rather what matter is how we use it.

Closing out credit card accounts will boost your score

When this new generation takes a step towards applying for a credit card, I swear their parents go crazy on them. Even I am one of them. But that was a myth and I got to know about this when I myself researched about it. When my brother applied for credit cards and I sew that he has a lot many, I just advised him to close them all at once. This was because of my own misconceptions about carrying too many credit cards will harm his credit score and the worst one was when I suggested him to close them all.

Yes, this is a myth that closing all our credit cards will raise our credit score. Unfortunately, it doesn’t work this way at all. The major factor that affects the credit score is the debt to credit ratio and closing too many cards will drastically bring it down which in turn will cause a drop in credit score too. When we close a credit account for no reason or with a due balance in it, it actually drop the credit report and you don’t get any benefit with the positive payment history in that account – which is one of the major factor for score. So it is advisable, instead of closing you credit cards completely you should pay the debts and keep them away from you so that you don’t get tempted towards it. Close one card after every few months and also monitor the impact on your credit score and credit reports.

Not using your credit cards can boost your credit score

This sounds to be very unreasonable myth that you will have a good credit score if you won’t use your credit cards. The actual picture is completely different from this as using your credit shows how good you are in managing your credits as it is completely based on your credit record – your history of borrowing and repaying it on time. If you are not regular on using your credit cards or borrowed a car or mortgage loan then you will always be a mystery for your future lenders. In case of any borrowing in future, the Banks/ NBFC’s will not be able to lend you with the best available interest rates or the required amount because they will not be sure about your creditworthiness.

Ideally, you should be using your credits responsibly and paying your bills on time and also in full whenever possible.

Checking your credit score will lower it

Many of us don’t have any idea about the current credit score because we always think that checking it regularly can cause a huge dent in it. Checking your credit score is never like if you peek in your notes during exams, rather you are allowed to do so. Yes, that’s true when a credit score or a credit report is checked by a Bank/ NBFC it is said to be hard inquiry can cause a little temporary drop in your credit score. However, when a check is by you, it is called a soft inquiry and it doesn’t hurt your credit score at all. You are free to check your credit score at Mudrahome whenever you want to as many times as you can.

Only late payments of certain debts will hurt your score

This is assumed that your credit score is only punched when your are late to make payments towards your mortgage EMI’s or paying your credit card bills on time or paying off for other debts such as car loan. but that’s not true. Any creditor of yours can report to the credit agency such as your landlords whose property you rented and has not paid the rent on time or may be any other whom you owe money.

I can’t get a mortgage because my credit score is too low

This is generally misunderstood by many of us. Definitely we can borrow ith a low credit score. The only difference is that you might not be able to avail the best available interest rates in the market as compared to those who have a healthy score. There are lot of Banks/ NBFC’s and other financial institutions that offer funds to people with poor credit score. However, the interest rates are likely higher and require you to borrow a secured loan. you just have to be little careful with the lucrative offers they offer along with the loan amount, repayment options and the interest rates. I agree that credit score is a key to get a loan approved, but it is not the only factor that is considered by the lenders. While evaluating your creditworthiness, income level and the level of debts also play a vital role. Even with a bad credit score you can be approved for borrowing a loan but you are required to pay either high rate of interest or deposit a security.

Myths That Could Tank Your Credit Score


Keeping your credit score high is worth as long you are in financial life, as high scores will help you to save lot of money for many years. Keeping the above myths aside, it is important to do your homework, keep a tract of your debts and review your credit history yearly. Your little initiate will help you to balance and maintain your good credit score and good financial health.


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