I recently came across my grandfather’s jewelry store charge card from the 1940’s.
Back then, credit had more to do with your “good name” since you had a personal relationship with the merchant and a reputation to uphold in your area.
Store owners allowed you to have a line of credit with them based on knowing you would do right by them.
It was solely based on your payment history and reputation as being an honest person who paid their bills. My grandmother even had her own line of credit with the corner store in our neighborhood that was directly across the street from her. She was good friends with the store owners, Alice and Mary. She would purchase needed groceries and put it on her tab.
Times have changed. Tracking someone’s credit became computerized and isn’t just based on your payment history or personal relationships. Since in some way, people’s credit was built on a trust relationship at that time, people might still believe that their credit score in some way shows their value as a person. This is a myth.
Today, other factors are considered in determining how you appear to potential lenders and others who look over your credit. It has nothing to do with your value as a person. It is simply letting you know that based on certain criteria, the risk lenders take on you when you apply for a loan or credit card.
It is also a myth that the credit bureaus label you as having a “good” score or “bad” score. They aren’t sitting there, marking up a financial report card with a red pen like some teacher with a chip on their shoulder that enjoys being the bearer of bad news. The report isn’t some scarlet letter put together in any way to shame or judge you. They simply gather up information regarding your debts and tabulate a score that shows where you stand in terms of risk.
You may have also heard that checking your own credit lowers your score. I thought that when I was looking to buy a house. I was hesitant to check my credit score because I knew that when you apply for a loan, you get a ding on your report that can drop your score a bit – these are known as hard inquiries. Though I had a score that would allow me to get a lower interest rate, I didn’t want to do anything that could potentially jeopardize it in any way. I thought getting my own credit report could do that. This is also a myth.
Sometimes we don’t realize it but we catch tidbits of information that can be partially true from a co-worker or from listening to your neighbor’s experience that is no longer up-to-date or is inadvertently told with inaccurate information. Why not get the information straight from one of the credit bureaus?
Listening to random advice can be like playing telephone: where someone starts a sentence and has to tell it as a secret to the person sitting next to them and seeing if it’s reiterated exactly the same way after several people hear the message. The message continues to get handed over and tends to get changed like a verbal baton that can easily distort the original message. I find it much easier to check in with a good source. If you need a refresher, want to debunk some myths or you just want a better understanding of general guidelines, you should check out this infographic called 11 Credit Myths: Don’t Fall for ‘Em by Experian.
This blog post was written as part of a sponsored program for ConsumerInfo.com, Inc., an Experian Company. All views expressed are entirely my own and were not influenced or directed by Experian. This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.