15 Credit Myths To Dispel

Credit Report

When talking about credit, there have always been a lot of myths surrounding the subject. Not only is there a lot of confusion around how to get a credit report, there is also confusion around how consumers can check their credit score. Let’s take a look at some of the most common myths about credit to help dispel any confusion and mystery around the subject.

15 of the Most Common Credit Myths

1. Credit Scores Cannot Be Rebuilt

You can improve your credit scores over time, plain and simple. And if there are inaccuracies, you have a right to dispute them with the 3 major credit bureaus. Thanks to the Fair Credit Reporting Act (FCRA), bureaus are required to investigate and respond within 30 to 45 days.

2. It Hurts Your Credit to Check Your Score

Another myth about credit is that you cannot check your credit as it will hurt your credit score. However, if a consumer accesses their credit report on their own, such as through a credit monitoring service like SmartCredit, it does not have any impact on their credit score. When checking your credit score, it is considered a soft inquiry, and soft inquiries do not have an effect on your credit score.

3. Education Will Affect Your Credit

Education level is not part of a credit report, so it does not affect a consumer’s credit score. The information in a credit score pertains only to debt-related info. This means that personal loans, credit card information, payment history, insolvency, and civil judgments will be reported.

4. There’s Only One Credit Score That All Lenders Use

There are many different credit scoring models. Credit scores are used by many types of lenders and credit companies to determine a consumer’s credit risk. However, some credit bureaus may use customized credit scores that are designed to predict risk for specific types of financing or for particular kinds of loans, such as home, auto, or personal loans.

5. Paying Cash Helps Credit

Credit use does not result in bad credit scores, credit abuse does. Using cash for everything isn’t a better option as much as using credit sensibly is. To establish a good credit score, consumers should have some type of credit and payment history that demonstrates responsible use.

6. The Best Way to Improve Scores Is to Pay Off All Accounts—and Close Them

While this isn’t a complete myth, it’s only a partial truth. While paying off all debts is one of the fastest ways to improve a credit score, closing credit accounts can damage a credit score.

One of the most significant elements in determining credit scores is credit utilization ratio. This refers to the amount of debt you have accumulated compared to your income (the credit you are currently using divided by the amount of credit that is available to you). Paying off debts reduces that ratio, thus improving a credit score.

7. Bad Credit Doesn’t Impact Candidates Getting Hired

In specific industries, knowing a candidate has a solid credit history is a significant part of the hiring and screening process.  

8. Your Credit Report Tells You Everything You Need to Know About Credit

Getting your credit report is something that can set you on the right path to understanding your credit. However, while it does give you a snapshot of your creditworthiness, that’s not the only thing it displays.

9. Only Credit Card Companies are Interested in Credit

Credit card companies are not the only ones using credit scores for lending decisions. Other industries, such as credit unions and potential landlords, may also use credit information to determine whether they want to do business with you.

10. All Credit Reports Have the Same Information

Credit bureaus look at different combinations of factors to come up with your credit score. It’s best to keep your credit reports error-free and complete payments on time to ensure that no matter which credit report you receive, you will always have a solid understanding of your financial health.

11. Credit Bureaus Are Owned by the Government

While it may be easy to consider credit bureaus as being a part of official government agencies, this is not the case. Credit bureaus operate as independent, commercial companies.

Additionally, the government protects your rights to access your credit reports, dispute credit information, determine who can access your reports, as well as the ability to seek damages from violators due to the Fair Credit Reporting Act (FCRA).

12. You Can Have a Joint Credit Report

There is no such thing as a joint credit report. A consumer’s credit history is attached only to the individual. Even if a consumer files joint taxes with your partner or has joint credit cards, credit information is always kept separately on all credit reports.

13. Divorce Does Not Impact Credit

Correct, filing for divorce does not impact your credit score. However, things such as late or missed payments can negatively impact your credit score. Often, any debt that was acquired during a marriage is the responsibility of both partners and should be managed as such.

14. All Debt is Bad

While debt may not be everyone’s favorite word, not all debt is bad debt. In fact, some debt can help a consumer build credit. Debt can be a complicated topic, so be sure to speak with a professional about your credit history before you apply for credit or take on significant amounts of new credit or debt, including credit card debt.

15. Income Affects a Credit Score

While things such as salary and income are considered in your credit report, they are only done so to understand your capacity to pay bills, not your potential credit risk. However, while it’s good to know that the size of your paycheck does not influence your credit, you should know all the factors that are involved with determining a credit score.

Contact SmartCredit Today

Having a credit monitoring service you can trust, not only will help you receive your credit reports and scores more easily, but you will also be notified if any suspicious or unauthorized activity that occurs on your credit report.

SmartCredit’s goal is to offer customers a simple and easy-to-use platform to manage their cash and credit all in one place. With advanced gamified tools, you can rest assured that your credit is being monitored and that your best credit score is at reach around the clock, 365 days a year.

If you need help understanding your credit to allow you to reach your financial goals, contact SmartCredit today.

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