Conquering bad information is never easy. Learn how financial blogger Kem Washington learned credit truths for herself to build credit confidence.
I knew little to nothing about the importance of good credit when I was in college. Of course, I understood the need to pay my bills on time, but there were so many credit myths I simply accepted as truth. As a result, I had to learn to separate myth from fiction the hard way. Fortunately, this doesn't have to happen to you.
Your Credit is Your Future
I didn't realize that the poor choices I made in college would follow me for so many years. It felt like the money that new credit offered me didn't have strings, and I was a busy student. As I began looking for employment, many companies viewed not only my grades and my limited résumé, but also my credit scores. About 33 percent of all employers perform a credit check before making a hiring decision, according to a survey conducted by the Society for Human Resource Management.
That was when I learned that the delinquencies I had let slide could remain on my credit file for up to seven years, and that other financial bumps in the road, such as bankruptcies, can remain for up to 10 years. From that moment, I carefully considered each and every credit decision I made. Especially to a new graduate, a decade can feel like forever.
Using Every Bit of My Credit
My credit cards helped me establish a credit history, but not necessarily a good one. I didn't realize how using too much of the credit available to me would end up hurting me. I was making timely payments on the cards but my credit scores suffered anyway because I used every penny of the credit lines that had been extended to me. This was when I learned about the all-important credit utilization ratio. This ratio compares the amount of credit you've used to the amount of the credit available to you. A higher credit utilization ratio can negatively impact your credit scores, whereas a lower ratio can affect it favorably. Many experts recommend a credit utilization ratio somewhere between 30 to 35 percent as ideal. So if your credit limit is $2,000, you'd want to keep your balances in the neighborhood of $600 to $700.
Monitoring May Help Lower Your Credit Scores
I never bothered to monitor my credit report because I thought that doing so would adversely impact my credit scores — another big myth. But, this isn't the case. When you request your credit report or use a service to get a copy for yourself to review, these are known as "soft" inquiries, which don't affect your credit scores. Creditors can't see you've done this when they look at your credit report.
With many credit myths out there, it's important to separate fact from fiction. It may make a difference in your credit scores, and it will definitely make you more knowledgeable about credit.
Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Experian.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
This article was originally published on May 26, 2015, and has been updated.