Debunking Credit Myths: Separating Fact from Fiction

Separating Facts from Fiction.

Credit scores and credit reports can be confusing, and with so much misinformation floating around, it's easy to fall prey to common credit myths. In this blog post, we'll separate fact from fiction and debunk some of the most persistent credit myths.

Myth #1: Checking Your Credit Score Will Lower It

Many people believe that checking their credit score will cause it to drop. However, this is not true. When you check your own credit score, it's considered a soft inquiry, which has no impact on your credit score. Hard inquiries, such as those from lenders and credit card companies, can affect your score, but the impact is usually minimal and temporary.

Myth #2: You Have Only One Credit Score

There is no single, universal credit score. In fact, you have multiple credit scores, which can vary depending on the credit scoring model used and the credit bureau providing the information. Lenders may also use different scoring models for different types of credit products.

Myth #3: Paying Off a Negative Item on Your Credit Report Will Remove It

Paying off a negative item, such as a collections account or late payment, will not automatically remove it from your credit report. While it's essential to pay off debts, the negative item will typically remain on your credit report for seven years from the date of the original delinquency. However, the impact of these items on your credit score will diminish over time.

Myth #4: A Debt Collector Can't Pursue a Debt After Seven Years

This myth confuses the statute of limitations with the credit reporting time limit. While it's true that most negative items will be removed from your credit report after seven years, debt collectors can still legally attempt to collect the debt, even if it's no longer reported on your credit report. However, it's crucial to know your rights and understand that they cannot sue you for the debt once the statute of limitations has passed.

Myth #5: You Don't Need to Worry About Credit Until You're Ready to Buy a House or Car

Good credit is essential for more than just obtaining a mortgage or auto loan. Your credit score can affect your ability to rent an apartment, secure a job, or even obtain affordable insurance rates. Building and maintaining good credit should be an ongoing priority, regardless of your immediate plans.

Separating fact from fiction is crucial when it comes to managing and improving your credit. By understanding the truth behind these common credit myths, you can make more informed decisions and take the necessary steps to achieve and maintain a healthy credit history.