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Myth-busting bad credit: 3 things to know about your low score

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Bad credit, a subprime score, or any number below 669 on the FICO scoring range. There are a lot of ways to talk about your bad credit, but they don’t always get to the facts. You can wind up believing some less-than-true things about it when you tiptoe around the subject.

Luckily, the most common misconceptions are easy to debunk. Here are three of them below:

Myth #1: It’s permanent

No credit score is permanent. That goes for the good ones, too. That’s because your score isn’t an identifying number that sticks with you for a lifetime like most social security numbers. Your score is a dynamic metric of your fluctuating borrowing habits.

Since your habits change throughout the years, so does your score. It reflects the changes in your finances as you go to school, buy a house, and use credit cards.

The good news is you have the power to improve your score, provided you stick with good habits that add positive credit history in your file.

The bad news is changing your score is more like a marathon than a sprint. It takes time to dig yourself out of bad credit.

Myth #2: You can’t borrow with it

One of the biggest myths about bad credit is that you can’t borrow money while you have it. That’s simply not true. While borrowing money may be harder when your score is low, there are still options available.

If you can’t wait to improve your score before you borrow, you may find cash advances, lines of credit, and online installment loans for bad credit if you know where to look.

The rates, terms, and even borrowing amounts differ drastically between these loans for bad credit. To learn more about how they compare, check out this resource page at MoneyKey that breaks down some of this information.

These financial products tend to cost more than traditional bank loans. That’s because many lenders apply higher fees to offset the risk your low score represents.

Myth #3: Paying off a loan will help your score

The day you pay off the last cent you borrow is one to celebrate. You’ve successfully closed your term, avoiding the possibility of any future late fines. It also means you don’t have to make another payment; your cash is yours again now that it isn’t tied up by these bills. Hooray!

Unfortunately, your credit score won’t soar despite all your hard work. Paying off a personal loan may strike outstanding debt from your name, but the account remains in your credit report for up to seven years. During that time, your account info and payment history will continue to affect your score.

This is another reason why you should hurry to adopt good credit habits. If an account shows you always paid on time, it will contribute positively toward your score.

But that means the opposite is true, too. If you handle an account irresponsibly, it may impact your history for as long as it remains in your file.

Bottom line

Get informed — the more you know about your score, the more likely you can make educated decisions that can boost your number. While it may not happen overnight, improving your score is possible.

Story by Rob Teitelman  

augusta free press
augusta free press