5 Common Credit Myths Debunked

Credit can be confusing, and myths about how it works often lead people astray. Let’s clear up five common misconceptions to help you manage your credit wisely.

Myth 1: Checking Your Credit Score Hurts It

Truth: Checking your own credit score is a soft inquiry and doesn’t affect your score. Only hard inquiries (like when you apply for a loan) can cause a temporary dip. Use tools like Experian or TransUnion to monitor your score safely.

Myth 2: Closing Old Credit Cards Boosts Your Score

Truth: Closing old accounts can shorten your credit history and increase your credit utilization ratio, both of which may lower your score. Keep old cards open, especially if they have no annual fees, and use them occasionally to keep them active.

Myth 3: You Only Need One Credit Bureau Report

Truth: Equifax, Experian, and TransUnion may have different information about you. Check all three reports annually at AnnualCreditReport.com to ensure accuracy across the board.

Myth 4: Paying Off Debt Erases Negative History

Truth: Paying off debt is great, but late payments or collections can stay on your report for up to seven years. Focus on building positive habits to outweigh past mistakes over time.

Myth 5: You Don’t Need Credit If You Pay Cash

Truth: While living debt-free is admirable, having no credit history can make it hard to qualify for loans or rentals. A thin credit file can be built with a secured credit card or by becoming an authorized user on someone else’s account.

Takeaway

Don’t let myths derail your credit journey. Stay informed, check your reports, and make decisions based on facts to build and maintain strong credit.