Your credit score is a source of personal pride.

It’s also one of the most important three-digit numbers to keep a close eye on.

If you’re on the road of building good credit, a misstep or two could be costly, especially if buying a home is your goal. An improved credit score of several points, for example, can help homebuyers secure a more favorable mortgage rate, even if it’s by a modest amount. That fraction of a percentage point is magnified, saving homebuyers tens of thousands of dollars, or even more, over the course of their loan.

If you’re getting back on track with your eyes set on the ultimate prize of owning a home, you know how important your credit score is.

As you move forward, be mindful of some of the common credit card myths that can lead you down a windy road. Don’t let them hold you back from achieving the credit score you deserve.

Myth 1: Credit card balance helps score

A majority of credit card holders think that carrying some balance will improve their credit standing. In fact, credit companies use credit utilization ratios as a primary metric to determine a consumer’s credit score. This is simply the percentage of available credit versus how much is being used. So, carrying credit will actually drag down the utilization, and thus potentially bring down the score.

As a general rule, consumers should target about a 30 percent utilization rate, but keeping it lower will be beneficial.

Myth 2: Credit checks come with fee

Thanks to federal guidelines, all consumers are entitled to a free credit report from the major credit bureaus: Equifax, Experian and TransUnion. Getting your credit score should be easy and free, too.

So, don’t fall for any services that charge you for simply reviewing your credit score. Many credit card companies offer customers a way to track their score, too. It can be done by simply logging into your account.

Once you review your report, which should happen at least once a year, look for any mistakes or discrepancies that you can contest.

Myth 3: Higher income equals higher score

That’s not quite the correct formula. If you’re making more money and put more toward debt, then yes, you can improve your score in multiple ways.  But simply having more spending capacity does not automatically mean a higher score.

Lenders, however, will consider your income when deciding how much credit to offer.

Myth 4: New credit accounts bring down score

Not so fast. Opening a new line of credit can actually have the opposite effect over the long run. While it’s true that a new account will result in a short-term ding, a new line of credit is an opportunity to build on your good credit habits.

So, why will your score suffer in the short term when opening a new line of credit? The credit inquiry itself is what causes the short-term downgrade. But it’s nothing to worry about if you keep up with your end of the bargain.

Myth 5: Closing accounts boost score

Even if you close an older account, there’s no promise that it’ll help your score. That’s because length of credit history is one of those determining factors that go toward building your credit score.

A good strategy then is to keep older accounts open, use them occasionally then pay them off and keep them in good standing.

If you have any other questions, or need help with a home loan, contact us today!