10 Common Credit Myths Debunked

Credit scores are a critical part of our financial lives, yet they are often shrouded in myths and misunderstandings. Believing in these myths can lead to financial decisions that may not be in your best interest. In this guide, we’ll debunk 10 common credit myths and provide you with accurate information to help you navigate the world of credit more effectively.

Myth #1: Checking Your Own Credit Hurts Your Score

Fact: Checking your own credit, known as a soft inquiry or a “soft pull,” does not impact your credit score. It’s a responsible practice to regularly review your credit reports for accuracy and to monitor your credit score.

Myth #2: Closing Credit Card Accounts Improves Your Score

Fact: Closing credit card accounts can actually lower your credit score. It may reduce your overall available credit (credit utilization ratio), which can negatively impact your score. Instead, consider keeping the account open and using it responsibly.

Myth #3: You Need to Carry a Balance on Your Credit Cards

Fact: Carrying a balance and paying interest on your credit cards is not necessary to build or maintain good credit. You can pay your credit card balances in full each month and still build a positive credit history.

Myth #4: Credit Scores Merge When You Get Married

Fact: Your credit score remains separate from your spouse’s after marriage. However, joint financial activities, like opening joint credit accounts, can impact both individuals’ credit reports and scores.

Myth #5: Closing Negative Accounts Removes Them from Your Credit Report

Fact: Closing negative accounts doesn’t erase them from your credit report. Negative information, such as late payments or collections, can remain on your report for a set period (typically seven years), even after the account is closed.

Myth #6: You Can’t Improve a Bad Credit Score

Fact: You can absolutely improve a bad credit score over time. By practicing good credit habits, like paying bills on time and reducing debt, you can rebuild your credit and see positive changes in your score.

Myth #7: Paying Off Collections Erases the Negative Mark

Fact: Paying off a collection account may stop further collection efforts, but it doesn’t remove the negative mark from your credit report. The collection will still be listed, but as “paid.”

Myth #8: All Credit Scores Are the Same

Fact: There are multiple credit scoring models, with FICO® Score and VantageScore being the most common. These models may produce different scores based on the same credit data, so it’s important to know which score your lender uses.

Myth #9: Credit Repair Companies Can Remove Accurate Negative Information

Fact: Credit repair companies can only help remove inaccurate or outdated information from your credit report. They cannot legally remove accurate negative information. Be wary of any company that promises otherwise.

Myth #10: Bankruptcy Ruins Your Credit Forever

Fact: While bankruptcy can have a severe impact on your credit, it doesn’t last forever. Bankruptcy typically remains on your credit report for 7 to 10 years, but you can begin rebuilding your credit immediately after discharge.

Conclusion

Understanding the facts about credit is essential for making informed financial decisions. By debunking these common credit myths, you can take control of your credit journey and work towards building a stronger financial future. Remember that responsible credit use, regular monitoring, and addressing errors on your credit reports are essential steps in maintaining and improving your credit score.

Don’t let misinformation hold you back from achieving your financial goals. Instead, use the knowledge you’ve gained here to make informed choices about your credit and financial well-being. By doing so, you can take proactive steps to improve your credit and enjoy better financial opportunities in the future.