Common Credit Myths Debunked

Credit is an important part of our financial lives, but there are a lot of myths and misconceptions about how it works. In this blog post, we’ll debunk some common credit myths and give you the facts you need to make informed decisions about your credit.

Myth #1: Checking Your Credit Will Hurt Your Score

One of the most common credit myths is that checking your credit will hurt your score. In reality, checking your credit score is considered a “soft inquiry,” which doesn’t affect your score. It’s only “hard inquiries,” such as those made by lenders when you apply for credit, that can temporarily lower your score.

Myth #2: Closing a Credit Card Will Improve Your Score

Another myth is that closing a credit card will improve your credit score. In reality, closing a credit card can actually hurt your score by reducing your overall available credit and increasing your credit utilization ratio.

Myth #3: Carrying a Balance Will Improve Your Score

Some people believe that carrying a balance on their credit card will improve their credit score. In reality, carrying a balance can actually hurt your score by increasing your credit utilization ratio and leading to more interest charges.

Myth #4: Paying Off a Collection Account Will Remove It from Your Credit Report

Many people believe that paying off a collection account will automatically remove it from their credit report. In reality, the collection account will still appear on your credit report, but it will show as “paid” rather than “unpaid.”

Myth #5: Only One Credit Score Exists

There are actually many different credit scoring models used by lenders, and your credit score can vary depending on which model is used. For example, FICO and VantageScore are two of the most popular credit scoring models, but there are many others as well.

Myth #6: Closing a Credit Card Will Erase Its History

Another myth is that closing a credit card will erase its history from your credit report. In reality, the credit card’s history will remain on your report for up to 10 years, even after the account is closed.

Myth #7: Credit Repair Companies Can Remove Accurate Negative Information

Some credit repair companies claim that they can remove accurate negative information from your credit report, but this is not true. Only inaccurate or outdated information can be removed from your credit report, and you can dispute this information yourself for free.

Credit is an important part of our financial lives, but there are many myths and misconceptions about how it works. By understanding the facts behind these common credit myths, you can make informed decisions about your credit and work towards improving your credit score. Remember, it’s important to regularly check your credit report and score, pay your bills on time, and keep your credit utilization low to maintain a healthy credit profile.