The myths and facts about credit.
The world of credit can seem mysterious, but we’re here to help you bust the myths and get the facts straight.
Myths about credit.
If you pay all of your monthly bills on time, you’ll have good credit.
Not true. Only certain bills are reported to the credit bureaus. The only payments that always get reported are loan and credit card payments. Things like your rent, your phone bill, and your utility bills generally don’t get reported if they’re paid in full and on time each month. Instead, they usually show up on your credit reports if they go to collections.
If you save regularly, you’ll have good credit.
Not true. Credit bureaus don’t take the amount of money you have in the bank into consideration. So your bank statements may look great, but the credit bureaus won’t know that.
Income, assets, your address, or demographics have a direct impact on your score.
Not true. The credit bureaus only use your borrowing history to determine your credit score.
Facts about credit.
Credit is more than just a number. It affects where you live, what you drive, and how you handle a financial crisis.
- Your credit score affects the rates and terms you’ll get on car loans, credit cards, private student loans, and more.
- Your income has no bearing on your credit score. Someone making minimum wage can have the same credit score as a millionaire.
- Your credit score determines whether you’ll get a mortgage, and—if you do qualify—what interest rate you’ll get.
- You can pay your rent and utilities on time, and still have no score if those payments don’t get reported to the credit bureaus or if the credit scores your lender uses are not optimized to include those payments, even if they are reported.
- Over 40% of landlords will check your credit, so it does affect your chance to rent a quality apartment.
- To generate a credit score, you need at least one credit card or one installment loan.
- 40% of US adults have a low credit score—or no score at all.