Misconceptions about credit can lead to costly mistakes, from damaged scores to missed opportunities.
With so much conflicting advice, it’s easy to fall for common myths. Understanding the truth about debt is the first step to financial confidence.
Myth 1. Checking Your Credit Hurts Your Score
A common myth is that checking your credit will hurt your score. In fact, checking your credit is considered a “soft inquiry” and has no impact.
Regular checks can help you spot errors or signs of fraud early.
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Myth 2. Closing old credit cards improves your score
It may seem reasonable to close unused credit cards, but this can reduce your credit history and reduce your available credit, which can lower your score.
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Myth 3. You need to carry a balance to build credit
Carrying a balance does not improve your score. It costs you money in interest only. Paying off your balance in full each month is a smart strategy.
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Myth 4. Paying off debt quickly removes it from your report
Even after you pay off the debt, a record of it remains on your credit report for seven years. However, it shows that it has been paid, which is better than unpaid debt.
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Myth 5. All debt is bad debt
Not all loans are risky. Using credit properly, such as a mortgage, personal loan, or student loan, can help you build a strong credit history and increase your score.
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Myth 6. Credit cards are the only way to build credit
Although credit cards are common, there are other ways to build credit, such as a secured loan, being an authorized user on someone else’s card, or getting a car loan.
Pro tip: Benefit from emergency savings. For example, SoFi Check offers 4% interest, and a sign-up bonus of about $300.
Myth 7. Income affects your score
Your income does not directly affect your credit score. Rather, it’s about managing your credit accounts, payments, and balances.
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Myth 8. Debit cards help build credit
Using a debit card doesn’t help your credit score because the funds come directly from your bank account, not through a line of credit.
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Myth 9. You only need to worry about credit if you plan to borrow
Credit scores affect more than just borrowing. Insurance quotes, job applications, and rental approvals can all be affected by your credit.
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Myth 10. Checking all three credit bureaus is unnecessary
Each credit bureau—Experian, Equifax, and TransUnion—may have different information. Checking all three helps you get a more complete picture of your credit health.
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Stay informed, stay strong
Don’t let debt myths get in the way of your financial goals. By understanding the truth about debt, you can make informed decisions that lead to a better financial life.
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