Debunking Common Credit Myths in Canada: Separating Fact from Fiction
When it comes to credit, there’s a wealth of information—and misinformation—floating around. It’s crucial for Canadians to separate fact from fiction to make informed financial decisions. In this blog post, we’ll debunk some of the most common credit myths and provide you with the real facts.
Myth 1: Checking Your Credit Score Lowers It
- Fact: Checking your own credit score is considered a “soft inquiry” and does not impact your score. It’s important to regularly monitor your credit to keep track of your financial health.
Myth 2: Your Income Affects Your Credit Score
- Fact: Your income does not directly impact your credit score. However, lenders may consider income alongside your credit score when assessing creditworthiness for loans or credit lines.
Myth 3: You Only Have One Credit Score
- Fact: There are multiple credit bureaus in Canada, each with its own scoring model. Therefore, you might have slightly different scores from each bureau.
Myth 4: Carrying a Balance on Your Credit Card Boosts Your Credit Score
- Fact: Carrying a balance can actually be costly and isn’t necessary for building credit. Paying off your balance in full each month is usually more beneficial.
Myth 5: Closing Old Credit Accounts Will Improve Your Credit Score
- Fact: Closing old credit accounts can shorten your credit history and potentially lower your score. It’s often better to keep old accounts open, especially if they have a good payment history.
Myth 6: All Debts Are Equally Impactful on Your Credit Score
- Fact: Different types of debt can have varying impacts on your score. For instance, high credit card utilization can have a more negative effect than a mortgage with a consistent payment history.
Understanding the realities of credit is key to maintaining and improving your credit score. By dispelling these myths, you can take more effective control of your financial health. Remember, knowledge is power, especially when it comes to navigating the complexities of credit in Canada.
