Understanding credit is key to a good score

Understanding credit is key to a good scoreAlthough there are car loans for people with bad credit, improving a credit score can never hurt someone looking to apply for any type of loan.

According to personal finance author Liz Weston, many credit myths are causing people to make mistakes, or preventing them from being fixed, MSN reports.

Weston points out that someone who handles their finances responsibly is not guaranteed to have a good credit score. Habits that are good for an individual's wallet – such as having only one credit card or shutting down accounts – may hurt a credit score.

Checking a credit score on a free website at least once per year from the three bureaus that offer it will not hurt a the score, Weston says. In fact, it may help because individuals can check and ensure there are no mistakes that are hurting their chances of getting a loan.

In addition, many people believe that one has to carry credit card debt in order to get a good score. Weston says credit card holders do not need to be in debt or pay any interest in order to score well, and encourages paying off each credit card payment in full.