Top 5 Credit Myths
- Myth: My score will drop if I check my credit.
- Myth: Once I pay off a negative record, it will be removed from my credit report.
- Myth: My poor score will be with me forever.
- Myth: Paying off my debt will add 50 points to my credit score.
- Myth: Closing old accounts will improve my credit score.
Checking your own credit report is counted only as a “soft inquiry” and doesn’t harm your credit at all. Only “hard inquiries”, the one’s made from a creditor or lender when you apply for credit, can bring down your score a few points.
Negative records such as late payments will remain on your credit report for 7-10 years after they are first posted. Paying off the account before the end of the set term doesn’t remove it from your credit report, but will mark the account as “paid.” Your credit score will improve when you pay off your debts, particularly as more and more time passes since the default and the record finally expires.
Your credit score is just a “snapshot” of your credit risk at a particular point in time and is always changing. That means as you continue to make payments on time and pay down your debt, your credit score will steadily improve with time. A low score now definitely doesn’t mean you’ll have a low score forever.
While we all may wish this to be true, your credit score is calculated using a complex equation taking into accounts hundreds of factors and values. It is difficult if not impossible to predict how many points you can gain by changing one factor, like paying off a debt, but rest assured you will gain points.
While many people advocate closing old and inactive accounts as a way from improving credit, it many cases it may actually lower your score, as it may change your debt-to-available-credit ratio and make your credit history appear artificially shorter. If you want to reduce your levels of available credit, ask for your credit limits to be reduced, or close newer accounts instead.