Credit Myths - Top 5 Credit Score Misconceptions

You want to improve your credit scores but there are so many stories about what you should or shouldn’t do, it’s difficult to determine the truth from the myths.

We have all heard the rumors from neighbors, relatives, or friends. There are a wide variety of myths floating around about what you should and shouldn’t do to improve your credit reports and credit scores. 

*Top 5 Credit Misconceptions

1. My score will drop if I check my credit. 

Fortunately, this one is not true. Checking your report and score is counted as a “soft inquiry” and doesn’t harm your credit at all. Only “hard inquiries” from a lender or creditor, made when you apply for credit, can bring your credit score down a few points. Worried about damaging your credit while shopping around for a loan? Multiple inquiries for the same purpose within a short amount of time (a few weeks) are grouped into a less damaging period of inquiry.

2. Closing old accounts will improve my credit score. 

To close or not to close, that is the question. Many people advocate closing old and inactive accounts as a way of improving your credit. In most cases, closing accounts will have the opposite effect. Canceling old credit accounts can lower your credit score by making your credit history appear shorter. Think twice before closing the oldest account on your credit report. If you want to reduce your levels of available credit, ask for your credit limits to be reduced or close newer accounts instead.

3. Once I pay off a negative account, the credit bureau has to remove it from my credit report. 

Negative records such as collection accounts, bankruptcies, and charge-offs will remain on your credit report for 7-10 years. Paying off the account before the end of the set term doesn’t remove it from your credit report, but will cause the account to be marked as “paid.” It is still a good idea to pay your debts, it can improve your credit score, but the major improvement will come when the record expires.

4. Being a co-signer doesn’t make me responsible for the account. 

When you open a joint account, co-sign loans or become an authorized user on someone’s credit card, you are taking on legal responsibility for the account. Any activity on these shared accounts, good or bad, will show up on both people’s credit reports. If you co-sign for a friend’s auto loan and they don’t make the payments, your credit profile suffers from their actions and vice versa. The only way to stop this double reporting is to refinance the loan or to have the creditor officially remove you from the account.

5. Paying off a debt adds 50 points to my credit score.

Creditors calculate your credit score using complex algorithms that take into account hundreds of factors and values. It is very hard to predict how many points you can gain by changing one factor. For a person with a high credit score, just one late payment can cause a significant drop. If a person has a low credit score, it may not cause a large drop at all. There is no magical way to improve your credit score, except to keep paying your bills on time, reducing your debts and removing negative inaccuracies from your credit files. 

Good financial behavior and time are the two most important factors on your credit score (*Truecredit)