Top 5 Credit Myths Debunked: What You Need to Know

When it comes to credit, many people have misconceptions that could actually hurt their financial health. In this article, we’ll debunk some of the most common credit myths and clarify the facts behind them.

1. Myth #1: Checking Your Credit Score Will Hurt It

Fact:Many people avoid checking their credit score because they believe it will hurt their credit. In reality, checking your own credit score is considered a soft inquiry, which has no impact on your score. Only hard inquiries, like when a lender checks your credit during a loan application, can lower your score.

2. Myth #2: Closing a Credit Card Improves Your Score

Fact:While it may seem logical that closing old or unused credit cards would improve your score, doing so can actually hurt it. Closing a card reduces your available credit, which increases your credit utilization ratio (the percentage of your credit limit you’re using). This could cause a dip in your credit score.

3. Myth #3: Carrying a Balance Helps Improve Your Score

Fact:Carrying a balance on your credit card doesn’t help build your score. In fact, it can be detrimental. The key to improving your credit score is keeping your credit utilization rate low—ideally under 30%. Paying off your balance in full each month is the best strategy.

4. Myth #4: Your Income Affects Your Credit Score

Fact:Your income is not a factor in determining your credit score. Lenders may consider your income when evaluating your ability to repay debt, but your credit score is based solely on factors like your payment history, credit utilization, length of credit history, types of credit, and recent inquiries.

5. Myth #5: You Don’t Need to Check Your Credit Score If You Don’t Have Debt

Fact:Even if you don’t have debt, it’s still essential to check your credit score regularly. Your credit score is a reflection of your financial health, and errors or fraud can negatively impact it. Regular monitoring helps ensure that your credit report is accurate and free from identity theft.

Understanding the truth behind these common credit myths can help you make smarter financial decisions and avoid unnecessary mistakes that could hurt your credit score. Stay informed, check your credit regularly, and always focus on responsible credit management to maintain or improve your financial health.