Credit myths and misconceptions are plentiful. Don't let incorrect information influence your credit. Below are examples of some common credit myths.
Myth: Your score drops if you check your own credit.
Checking your own credit report is known as a “soft inquiry” and does not impact your credit score. In fact, it’s a great credit habit to have. Consistently monitoring your own credit can pay off in the long term. Keeping tabs on your credit report information will make it easier to spot potential fraud and help you understand credit score movements. For helpful tips and insights, check out this tool on how to read your credit report.
Myth: Closing an old account helps your credit.
Closing an old credit account can be a smart money move if you’re worried it may cause you to continue spending unnecessarily but closing an account won’t necessarily help your credit score. Lenders like seeing that you have a long history of responsibly using credit. Closing longstanding accounts can reduce the average age of your credit, which may negatively impact your credit score.
Myth: Paying off a negative record means it's taken off your credit report.
Generally, negative records, such as collection accounts and late payments, will remain on your credit reports for up to seven years from the date of first delinquency. Of course, it's smart to pay your debts, both to reduce the total amount of debt you owe and to show your willingness to repay your obligations but expect the negative record to have some effect until it is removed from your report.
Myth: Your credit score will sometimes change for no reason.
Your credit score is calculated based off the information in your report. If your score changed, something in your report did as well. If your score dropped suddenly and you’re not sure why, it’s best to read your credit report to see why the change occurred. Did you make a large purchase on a credit card recently? The balance may have been reported before you paid it off in full. Hard inquiries and account closures can also impact your credit score. You may have to dig for some clues, but your report holds the answer to a fluctuating credit score.
Myth: With a few simple hacks, you can raise your score quickly.
Building a healthy credit history takes time. Of course, there are things you can do immediately to make progress—paying down high balances and disputing inaccurate information on your reports are a great start. However, a good credit score is the work of many months of healthy credit habits. No “hacks” necessary. A steady record of sound financial behavior over time will have the most significant impact on your score.