Common credit misconceptions (CONTINUED)
Your income impacts your score. This isn’t true, but creditors may factor your debt-to-income ratio into their decision.
Closing old accounts will improve your credit. Closing old accounts makes sense in some situations, but only if done carefully. Your credit history is based on the oldest account in your portfolio. Closing your oldest account will change the length of your credit history and could have a negative impact on your score. If you close a credit card that has a limit of $3,000, you’re taking that much money away from the denominator of the credit utilization ratio. As such, your credit utilization could increase and bring down your score. Your closed account won’t disappear right away. If you’re still making payments on the account, these will probably still be reported to the credit bureaus. Negative closed accounts, such as those charged off by the creditor, stay on your report for seven years. Accounts closed in good standing stay on your report for 10 years.
Renting lowers your score. Being a renter won’t impact your score, but making late rent payments could affect it in time if your landlord reports payment information.
A high savings account balance improves your credit score. No matter what your savings account balance is, it won’t impact your score.
Chapter 3: Credit scores
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