Credit Myths Debunked

There are two types of credit inquiries: hard and soft. When you check your own credit it is always a soft inquiry. Soft inquiries are not visible to lenders and never affect your score. You can check your credit as often as you like without any negative impact.

This is one of the most expensive myths out there. Your payment history and credit utilization are reported regardless of whether you carry a balance. Paying interest does nothing to help your score. What matters is that you use your credit and pay at least the minimum on time.

When you close a credit card two things happen: your overall credit limit decreases which raises your utilization ratio and your average account age may decrease. Both of these hurt your score. Keep old cards open even if you rarely use them.

FICO alone has multiple versions and each credit bureau calculates scores differently. There are also industry specific scores for auto loans and mortgages. The score you see from a free service may differ from what a lender sees.

While paying a collection is the right thing to do it does not automatically remove it from your credit report. The status will change to paid but the account remains. However newer FICO models like FICO 9 ignore paid collections entirely.

Your credit score is based only on how you manage credit not how much money you make. High earners can have terrible credit and modest earners can have excellent credit. Lenders may consider income separately when making decisions but it is not in your score.

Marriage does not merge your credit reports or scores. Joint accounts will appear on both reports but each spouse maintains their own credit file. One spouse's bad credit does not automatically affect the other unless they have joint accounts.

Credit scores measure how well you manage credit. Having no credit history can actually hurt you. A mix of credit types like cards and installment loans shows lenders you can handle different types of debt responsibly.

You cannot dispute accurate negative information just because you do not like it. Credit bureaus must investigate disputes but if the information is verified it stays on your report. Focus disputes on items that are actually wrong.

Under the FCRA you have the right to dispute errors on your credit report. Credit repair companies use the same laws and processes you can use yourself. What they offer is expertise convenience and time savings not special access.

When an employer does a credit check with your permission they receive a modified report that does not include your credit score. They see payment history and public records but not the three digit number. This is different from what lenders see.

While bankruptcy is serious it is not a permanent sentence. You can start rebuilding immediately after discharge with secured cards and credit builder loans. Many people reach 700 plus scores within a few years through consistent positive behavior.