3 Popular Credit Myths!

tyMyth #1: You share a credit score with your spouse.

This is a myth! Both spouses have separate profiles. If you have joint accounts they will show up on both of your reports. If you call your credit card provider and add a spouse as an authorized user then that will also show up on both your reports. BUT, if you have no joint or authorized user accounts then there will be nothing that will affect your score from each other.

I ALWAYS suggest keeping separate credit profiles. The reason is simple. If you have a joint credit card and forgets to pay the bill, then both will incur a 30 day late. This along can easily reduce a score from a 750 to a 650. So there is no benefit to having a joint account. Keep separate profiles in case one spouse makes a mistake.

Myth #2: Your credit score only counts when you’re applying for a loan.

Our score is looked at for almost everything you do, such as:

*Applying for a job
*Applying for auto insurance
*Homeowners insurance
*Life insurance

Don’t fear the past. We all have made mistakes! It’s important to take control of your credit sooner rather than later and we hope this tip helps!

Myth #3: Paying off your credit cards in full will give you the best credit.

This topic is a huge debate! Some will say to keep a small balance (less than 10%), others will say to pay off your balance entirely. You see, these are both correct. Let me explain the difference.

Keeping a small balance: It’s no secret that FICO hits us dramatically for maxing out our credit cards. You will hear people say to keep your balance at 50% less than your limit, others will say 30%. Ideally the correct answer is between 1-9%, or in other words less than 10%. The theory on this is FICO will reward you for making payments per month which gives us great payment history. Payment history is a large part of our score so there is truth to this strategy.

Keeping a $0 balance: The argument here is that if you are not carrying a balance then you are not showing any payment history. Payment history is a large part of our score.

My opinion: I’ve changed my opinion on this strategy throughout the years and what I came up with after years of testing is this. I will suggest paying off your cards in full and have a zero balance. BUT I will suggest charging something small once every 3 months. For example, you can simply charge a pack of gum, or like I do, a tank of gas every 3 months. This will report as positive payment history.

The big caution here is to keep a 0 balance for a long period of time. By charging a small item every 3 months it’s enough to keep positive payment history.

This strategy will also be easier to remember compared to worrying what balance you are carrying over each month.