Differentiating Credit History Facts From Myths: What Really Works

The importance of a good score in the modern world cannot be understated. Unfortunately, the myths surrounding how credit score works do not help individuals improve their credit score and thus, it is important that you learn to differentiate the truth from myth. Basically, a credit score is a number that is calculated using information from your past credit information to help lenders know your creditworthiness. The information is used by lenders to determine whether you will likely repay the debt as agreed. Therefore, a credit score can be described as a risk score.

What is the truth about your credit score?

Your credit score is a reflection of your past repayment details with an emphasis on the recent information. As a precaution, you should always pay your credit on time as late payments can negatively affect your credit score. You should always try to keep balances on your credit cards low as high outstanding debt can negatively affect your score. You should not fall for a myth that opening many credit accounts puts you in a better credit mix. Instead, you should only apply and open credit accounts that you need. You should also pay off your debt instead of moving it around. You should also avoid closing your unused cards as a short-term strategy to improve your credit score. You should also remember that the modern financial market keeps changing and thus, you should subscribe and follow credit secrets YouTube channels and LinkedIn to learn about the latest credit history details.

Things you should know about credit history

When it comes to credit score, you should note that some factors are more important than others in many critical credit scoring models. For example, the credit utilization ratios and payment history play a bigger role in influencing your credit score. When it comes to issuing loans, a good past payment history is considered a good sign of future performance. Paying all your bills on time as agreed every time you borrow plays a major role in influencing good rating while paying late or settling less amount than the agreed amount will negatively affect your rating significantly. If you have late or missed payments, you should keep them current and continue to pay on time. Over time, the influence of older late repayments will diminish.

The credit utilization ratio is determined by dividing the total balance of your credit cards and dividing the balance with your credit limit. You should remember that like payment history, the credit utilization ratio is considered highly in determining your credit score across all major credit scoring models. The scoring models use the credit utilization ratio to find how you manage your credit. Generally, lenders like to see a very low credit utilization ratio of about 30-percent or less. Low credit utilization means that you have not maxed out your cards and thus, you are a good manager of your credit. Opening a new credit card may increase your total credit limit but the act of applying will create a hard inquiry on your report. Many hard inquiries can negatively affect your credit score.

Understanding the different credit score ranges

To start with, lack of a credit history or low credit history does not necessarily mean that you cannot get a loan. There are credit lenders who offer special loans that target people with a poor or bad credit history. However, with a poor credit score, you are more likely to be denied a loan than a person with a good credit history. Furthermore, if you qualify for a loan with a poor credit history, you will likely be offered higher interest rates to compensate for the bigger risk. There are many different types of credit scores but the major types are FICO and VantageScore.

FICO has a rating score range of between 300 and 850. A FICO rating of between 300 and 579 is considered very poor and people with this rating may find it difficult to get credit. A rating of between 580 and 669 is considered fair and people in this rating are considered the subprime borrowers. A FICO rating of between 670 and 739 is considered good while a rating between 800 and 850 is considered exceptional. Factors that greatly influence FICO ratings include payment history on credit cards and loans, total debt and amounts, length of credit history and the types of credit accounts.

VantageScore model has a rating score of between 300 and 850 with a rating of between 500 and 549 considered very poor, 550 and 649 considered poor, 650 and 699 considered fair, 700 and 749 considered good and 750 and 850 considered excellent. Factors that greatly influence VantageScore ratings include the payment history, credit type, and age, percent of credit limit used, recent credit behavior, total debts and balances and inquiries.


As much as it is good to find credit secret tips that work on various platforms like LinkedIn or credit secrets YouTube channels, it is also good to find what does not influence your credit score. Generally, your race, sex, occupation, or marital status does not influence your rating. You should also note that checking your own credit history does not affect your credit score. It is also imperative to note that there is no quick fix to a poor credit history. Your credit score will constantly change as the information in your credit report changes and thus, you should look for long-term solutions to improve your rating.