The Top 10 Credit Myths Debunked.

Credit is a subject that affects everyone, yet many people harbor misconceptions about how it works. These myths can lead to misguided financial decisions, which can have a substantial impact on your credit score and overall financial health. In this article, we will debunk 10 of the most common credit myths, empowering you to take control of your finances.

Myth #1: Checking Your Credit Report Hurts Your Credit Score
Many people believe that checking their credit report will hurt their score, so they avoid doing it altogether. However, this is far from the truth. Under federal law, everyone is entitled to one free credit report from each of the three major credit bureaus every 12 months. Additionally, you can check your credit report as often as you like without impacting your score, as these are known as soft inquiries.

Myth #2: Closing Credit Cards Will Improve Your Score
Contrary to popular belief, closing credit cards can actually harm your credit score. This is because your credit utilization ratio – the amount of credit you are using compared to your total credit limit – will increase if you close a credit card. Experts suggest keeping your credit utilization ratio under 30% to maintain a healthy credit score, so it’s important to keep your credit cards open unless you have a good reason to close them.

Myth #3: Paying Off Your Credit Cards in Full Every Month Is Pointless
While it’s true that carrying a balance on your credit card will help boost your credit score, it’s important to remember that carrying a balance also means paying interest on that balance. If you can afford to pay off your credit cards in full every month, you should do so. This will save you money on interest charges and help you maintain a healthy credit score.

Myth #4: Applying for Multiple Credit Cards Will Improve Your Score
While having multiple credit cards can help diversify your credit mix, applying for too many credit cards at once can harm your credit score. This is because each time you apply for a credit card, the issuer will perform a hard inquiry on your credit report, which can lower your score. Additionally, having too many open credit accounts can also be a red flag to lenders and make them less likely to approve you for new credit.

Myth #5: Paying Your Bills Late Won’t Hurt Your Credit Score
This is one of the most dangerous credit myths out there. Paying your bills late – whether it’s your credit card, car loan, or mortgage – can severely damage your credit score. Late payments can stay on your credit report for seven years and have a negative impact on your score for the entire time they’re there. To avoid this, be sure to make your payments on time every single month.

Myth #6: Your Credit Score Drops Whenever You Check It
As we discussed earlier, checking your credit report is a soft inquiry and won’t harm your score. The same is true for checking your credit score. If you sign up for a free credit monitoring service, you can check your score as often as you like without impacting it. There are even credit cards that offer free credit monitoring, so you can keep an eye on your score without incurring any costs.

Myth #7: Only the Rich Can Have Good Credit Scores
This myth couldn’t be further from the truth. Your credit score isn’t determined by how much money you make or how much you have in your bank account. Instead, it’s based on your credit history and how you’ve managed your credit in the past. So, even if you don’t have a lot of money, you can still have a good credit score by making your payments on time and using credit responsibly.

Myth #8: You Can’t Get Credit If You Have Bad Credit
While it can be more challenging to get approved for credit if you have a low credit score, it’s not impossible. There are many lenders who specialize in working with people who have bad credit, and they may offer secured credit cards or loans to help you rebuild your credit. Additionally, you can take steps to improve your credit score by making your payments on time, paying down your balances, and disputing any errors on your credit report.

Myth #9: Your Credit Score Is Set in Stone
Your credit score isn’t set in stone and can change over time. By taking steps to improve your credit habits, you can boost your score and achieve a higher rating. This could include paying down your balances, disputing any errors on your credit report, and making your payments on time.

Myth #10: You Don’t Need to Check Your Credit Score if You’re Not Applying for Credit
Even if you’re not planning on applying for credit in the near future, it’s still important to check your credit score periodically. Monitoring your score can help you catch any errors on your credit report, detect any signs of identity theft, and keep you on track with your financial goals.

In conclusion, understanding the truth about credit is key to maintaining a healthy financial life. By debunking these credit myths, you can take control of your finances and ensure that you’re making the right moves to achieve a strong credit score.