Credit success is an important part of your overall financial well being because not only can your credit score affect the types of financing you qualify for and the interest rates you get (e.g. buying a home), it can also affect your employment and housing. So in honor of National Financial Literacy Month, I'm sharing the answers to 4 important credit questions that I asked Capital One executive and managing vice president, Jennifer Jackson, to help you better position yourself to achieve credit success and maintain good credit habits over the long term - and Yes, it includes paying your balances in full each month :) . Enjoy!
"I believe that people need to be empowered to make wise choices that make sense for their own situation when it comes to improving, maintaining or even rebuilding their credit."
Why is it important to have good credit?
It is very important to strive to achieve and maintain good to excellent credit because lenders will check a consumer’s credit score before offering them a mortgage, car loan, credit card, or personal loan.
It gives lenders an idea about how responsible a consumer is with paying back debt. If a consumer has a good credit score, then it will be easier for them to secure approval for loans and credit, and lower interest rates and fees.
What are the top 3 misconceptions about credit?
There are many misconceptions when it comes to credit, but here are three (3) that we frequently hear about:
- Many people believe paying their cell phone bill builds their credit score. The truth is that while paying cell phone bills on-time doesn’t positively build their score, if they are delinquent on payments, that could show up negatively on their credit report; therefore, it’s important to pay all bills on time.
- People believe that holding a credit card balance is good for their credit. While this is not necessarily a bad thing, everyone should strive to pay their credit card bill in full and on-time every month to build and protect their credit score.
- Many people also think that checking their credit report will not reduce your credit score. The reality is that a “hard” inquiry for credit card applications or credit checks can cause a temporary dip in their score, but “soft” inquiries such as checking their credit score through credit monitoring tools, like CreditWise from Capital One, will not impact their score.
How important is credit even if you aren't actively using it?
Having good credit and a good credit score can be beneficial even if you don't plan to use credit anytime soon. It can make it easier for you to rent housing, score a new job, or get lower insurance rates when you are ready for those life moments.
What ongoing things can be done to maintain or rebuild credit?
I believe that people need to be empowered to make wise choices that make sense for their own situation when it comes to improving, maintaining or even rebuilding their credit.
Regardless of their situation, be sure to maintain healthy credit habits, such as making on-time payments, and / or paying in full (or as close to full as possible). Tools like payment due alerts and auto pay help customers stay on top of their accounts.
Capital One offers CreditWise – which is free tool for everyone, whether they are a Capital One customer or not – to check their credit score so they can monitor their progress without it impacting their score. We have already seen that millions of CreditWise users have improved their score by 20 points or more since the app launched nearly a year ago.
Thank you so much for these great insights and for taking the time out your schedule to answer these questions Jennifer.
Were you aware of the top credit misconceptions? Have you taken steps to improve or rebuild your credit? Do you use any credit monitoring tools? Share in the comments, I'd like to know!
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