Credit Myths Busted: What really affects your score.
When it comes to managing your credit, misinformation is everywhere and sometimes it can lead to costly mistakes. In this article, we’ll debunk common credit myths, break down what really influences your score, and offer practical tips to build healthy credit habits—plus highlight how Lafayette Federal Credit Union’s tools can help you take control of your credit future.
Myth #1: Checking Your Credit Score Will Hurt It
This is one of the most widespread credit misconceptions. The truth? Checking your own credit score is a soft inquiry—it doesn’t affect your score at all.
Only hard inquiries – those initiated by lenders when you apply for credit – can have a small, temporary impact. In fact, regularly reviewing your credit report is a responsible financial habit. It helps you spot fraud early and understand where you stand before applying for a loan.
Pro Tip: Lafayette Federal members can easily monitor and regularly review their credit using our free credit score tool built into our online and mobile banking platforms.
Myth #2: You Need to Carry a Balance to Build Credit
Wrong again. Carrying a balance only increases interest payments. The key factor is credit utilization—how much of your available credit you’re using. Keeping your balances low (ideally under 30% of your credit limit) signals to lenders that you’re a responsible borrower.
What Actually Affects Your Credit Score?
Understanding the key factors behind your credit score can empower you to make smarter financial decisions. Here’s what matters most:
- Payment History (35%)
Late payments can damage your score quickly. Always pay at least the minimum due—on time, every time.
- Credit Utilization (30%)
As mentioned, using less of your available credit shows you’re not overextended. Aim for a utilization rate below 30%, and if possible, under 10% for optimal results.
- Length of Credit History (15%)
A longer history is better. Don’t close your oldest credit card—even if you don’t use it often.
- Credit Mix (10%)
Having various kinds of borrowing activity on your credit report—credit cards, auto loans, mortgages—will have a positive impact on your score.
- New Credit Inquiries (10%)
Too many recent hard inquiries (like applying for several loans or credit cards in a short span) can lower your score. Apply strategically and avoid excessive credit-seeking behavior.
Smart Tips When Applying for Mortgages, HELOCs, or Personal Loans
Loan shopping is a smart move—but doing it the wrong way can lower your credit score. Here’s how to protect your score and get the best possible loan terms:
- Shop Within a 14- to 45-Day Window: When applying for a mortgage, HELOC, or personal loan, credit scoring models like FICO group multiple inquiries from mortgage or auto lenders as a single inquiry—if done within a set period (usually 14–45 days). This lets you compare offers without accumulating damage from each hard pull.
- Limit Non-Rate Shopping Inquiries: Inquiries for credit cards or retail financing don’t get grouped. Be careful not to apply for multiple other credit types while loan shopping.
- Prequalification Is Your Friend: Many lenders, including Lafayette Federal, offer soft pull prequalification. You can see your estimated rate and terms without a hard inquiry.
- Avoid Big Credit Moves Before Applying: Don’t open new accounts, max out cards, or close old accounts before applying for a loan. Lenders want to see stable, responsible use of credit.
Lafayette Federal Advantage: Our team can help you understand the impact of loan shopping on your credit and offer personalized loan options with competitive rates—no guesswork or unnecessary impacts on your credit score.
How to Build Healthy Credit Habits
Whether you’re starting out or rebuilding, these foundational practices can strengthen your credit over time:
- Pay on Time: Never miss a due date on a payment. Use Bill Pay or AutoPay features to ensure you make your payments on or before their due date.
- Keep Balances Low: Pay off high-interest cards first, then tackle others to reduce your overall credit utilization.
- Limit New Applications: Only apply for credit when you need it.
- Check Your Credit Reports: You’re entitled to one free credit report per year from each of the three major bureaus at AnnualCreditReport.com. Review them for errors or suspicious activity.
Lafayette Federal Helps You Succeed Financially
At Lafayette Federal Credit Union, we’re more than a financial institution—we’re your partner in long-term financial health. Our members have access to:
- SavvyMoney® Credit Monitoring: Built into online banking and our mobile app, this free tool gives you access to your credit score, report, alerts, and personalized advice on how to improve your score.
- Credit Counseling & Educational Seminars: We regularly host free webinars and one-on-one sessions to help you master credit management, understand lending decisions, and plan for major financial milestones.
- Smart Lending Solutions: From credit-builder loans to competitive-rate credit cards and home financing options, our products are designed to help you grow your credit with confidence and control.
Don’t let credit myths steer you in the wrong direction. With the right tools, habits, and insights, you can improve and protect your credit score—setting yourself up for financial success.
Want to take the next step? Visit Lafayette Federal Credit Union to explore our credit-building resources, or speak with one of our knowledgeable representatives today.
