Credit Myths Debunked: Unraveling Common Misconceptions

In the intricate world of personal finance, credit is a topic that often comes with its fair share of myths and misconceptions. These myths can influence financial decisions and, in some cases, lead to detrimental consequences. In this comprehensive guide, we aim to debunk common credit myths, providing clarity on misconceptions that may have misled individuals in their understanding of credit.

Myth 1: Checking Your Credit Hurts Your Score


Contrary to popular belief, checking your own credit report or score is considered a “soft inquiry” and does not impact your credit score. Monitoring your credit regularly is a responsible financial habit and allows you to identify and rectify errors promptly.

Myth 2: Closing a Credit Card Boosts Your Score


Closing a credit card account can actually harm your credit score, especially if it’s an account with a long credit history. The closure reduces your overall available credit, potentially increasing your credit utilization ratio and impacting your score negatively.

Myth 3: A High Income Guarantees a Good Credit Score


While a higher income can provide more financial resources, it does not directly influence your credit score. Credit scores are based on credit-related activities, such as payment history and credit utilization, not on income levels.

Myth 4: Debit Cards Impact Your Credit Score


Debit card transactions do not affect your credit score because they are not forms of credit. Credit scores are influenced by your behavior with credit accounts, such as credit cards and loans, not by spending from your checking account.

Myth 5: Closing Accounts Removes Negative Information


Closing an account does not erase its history from your credit report. Positive and negative information remains on your credit report for a certain period, typically seven years. Focus on improving your credit behavior to positively impact your score over time.

Myth 6: Only One Credit Score Matters


There are multiple credit scoring models, with FICO and VantageScore being the most common. Different lenders may use different models, resulting in variations in your scores. It’s essential to be aware of the specific scoring model relevant to your situation.

Myth 7: Bankruptcy Ruins Your Credit Forever


While bankruptcy is a significant negative event, its impact diminishes over time. Bankruptcies remain on your credit report for seven to ten years, but you can take steps to rebuild your credit through responsible financial behavior.

Myth 8: You Need to Carry a Balance to Build Credit


Carrying a balance on your credit cards is unnecessary for building credit. You can build and maintain a positive credit history by making on-time payments and using credit responsibly, even if you pay your balances in full each month.

Myth 9: Credit Scores Reflect Personal Characteristics


Credit scores are based on financial behaviors, not personal attributes. Factors such as race, gender, and marital status are not considered when calculating credit scores. The focus is on how you manage your credit responsibilities.

Myth 10: Cosigning Has No Risks for the Cosigner


Cosigning for a loan means taking on shared responsibility for the debt. Both the primary borrower and the cosigner are equally responsible for repaying the loan. Any missed payments or defaults can affect both parties’ credit scores.


Debunking credit myths is crucial for fostering a clear and accurate understanding of credit-related matters. Armed with the correct information, individuals can make informed financial decisions, avoid unnecessary pitfalls, and actively work towards building and maintaining a healthy credit profile. By dispelling these common misconceptions, we empower ourselves to navigate the world of credit with confidence and financial acumen.

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