Log in Log in Log in Apply now

Don’t be fooled by these six credit myths

Credit & debt, Credit cards

Couple reviewing paperwork and cross referencing the documents with information non their computer.

You already know it’s important to have a good credit score. But do you know how to establish one? A recent survey conducted by Oportun found that only 54 percent of people feel confident in their understanding of how to build credit.

Unfortunately, most schools don’t teach you how to manage credit. And it’s easy to get confused when there are so many credit myths out there, spread on the internet or by word of mouth. That’s why we’ve put together a list of common credit myths you should watch out for. Read on to learn more.

Here’s what we’re going to cover

  • Myth 1: Checking your credit report will hurt your credit score
  • Myth 2: You have only one credit score
  • Myth 3: Closing a credit card account will always improve your credit score
  • Myth 4: All debt is bad
  • Myth 5: Paying off debts erases them from your credit report
  • Myth 6: You have to have credit to build credit
  • Oportun: A chance to build your credit history
Key takeaways:

  • There are many credit myths in circulation. Knowing the facts can help you make better credit decisions and build a strong credit score.
  • Many people believe that checking your own credit report can hurt your credit score. Fortunately, this isn’t true. Another common myth is that closing a credit card account will boost your credit score. However, in some cases, it can have the opposite effect.

Myth 1: Checking your credit report will hurt your credit score

Do you avoid checking your credit report because you’re afraid it will bring down your credit score? If so, you’re not alone. Nearly 25 percent of the people we surveyed believe this widespread credit myth.

What are credit history, credit report, and credit score?Simply put:

  • Credit history: The details of your past and present credit use
  • Credit report: A written or digital record containing this information
  • Credit score: A three-digit number based on this information

Fact: Checking your own credit report with the nationwide credit reporting agencies won’t hurt your credit score. This myth got started because people confuse two different types of credit checks: soft inquiries and hard inquiries.

Soft inquiries

allow you or someone else to view your credit report without it affecting your credit score. It’s actually a good idea to look at your credit report from time to time to make sure there are no errors listed. You can get free copies of your credit reports from the national credit bureaus at AnnualCreditReport.com

Hard inquiries

Generally, when you formally apply for new credit, the lender will make a hard inquiry, or hard credit check with one or more of the three major credit bureaus. This allows them to review your full credit report to determine whether you’re eligible for a loan or credit card. Hard inquiries impact your credit score.

Myth 2: You have only one credit score

Another common credit myth is that you have only one credit score.

Fact: You can have multiple credit scores, depending on several factors.

Credit report

Credit scores are based on information from your credit reports. Each of the major credit bureaus—Equifax, Experian, and TransUnion—compiles its own credit report. Plus, there are additional companies that collect information on you. And each of these reports may contain slightly different information. So your credit scores may also be different, depending on which report was used.

Scoring model

FICO® is the credit scoring model most commonly used in the United States, but there are many others used by different reporting agencies. Different credit scoring models can give different results.

Myth 3: Closing a credit card account will always improve your credit score

If you’re like 18 percent of our survey respondents, you may believe that closing a credit card account will always make your credit score go up.

Fact: In some cases, closing a credit card account can hurt your credit score. Two benefits to keeping accounts open are:

Longer credit history

In the FICO scoring model, the length of your credit history counts for 15 percent of your overall score. And having a longer credit history is better for your credit score.

If you close a credit card account you’ve had for some time, it removes the ongoing benefit of having an established tradeline and may lower your credit score.

Lower credit utilization ratio

Your credit utilization ratio compares the amount of debt you currently owe to your total credit limit. To maintain a high credit score, it’s helpful to have a low credit utilization ratio.

When you close a credit card account, its credit limit will no longer be counted as part of your total credit limit. This can make your credit utilization ratio increase and your credit score decrease.

It’s also important to know that having too much open, unutilized credit or too many lines of credit open can also negatively impact your credit score. You should always consider what is best for you in each case. Speaking with a financial advisor can help you determine what’s best for your specific situation.

Myth 4: All debt is bad

Approximately 35 percent of the people we surveyed believe that all debt is bad.

Fact: You certainly don’t want your debt to be so high that you can’t pay it back. But some debt can help you build a better financial future.

Here are a few examples of good debt:

  • A student loan that helps you earn a degree
  • A small business loan that helps you start a profitable business
  • A mortgage that helps you buy a home
  • An affordable credit card or personal loan that helps you build a positive credit history

By taking out debt you can afford to pay back on time, you can use your credit accounts to help you reach your financial goals.

Myth 5: Paying off debts erases them from your credit report

Over 20 percent of the people in our survey think that once a debt is paid in full, it disappears from your credit report.

Fact: Even debts you’ve paid off can remain on your credit report for up to seven years.

This isn’t necessarily bad. If you make all your debt payments on time, it can help your credit score for years to come. That’s because payment history counts for 35 percent of your FICO credit score.

Late or missed payments, however, can hurt your credit score for up to seven years. Debts that were sent to collections or resulted in bankruptcy can have even more severe consequences for your credit score.

Myth 6: You have to have credit to build credit

How do you get approved for a loan or credit card if you don’t have any credit history? Over 20 percent of the people we surveyed believe that their credit score is the only thing a potential lender considers. If this were true, you’d never be able to start building credit.

Fact: Fortunately, some lenders look at factors besides your credit score during the application process. They may take into account your:

  • Annual income
  • Employment status
  • Debt-to-income ratio
  • Assets
  • Rent and utility payment history
  • Cosigner’s credit

If these factors look favorable, you may be able to qualify for a loan or credit card with some lenders.

And there are other opportunities for building credit. Even without a credit history, you can:

  • Apply for a credit builder loan
  • Apply for a secured credit card
  • Become an authorized user on someone else’s credit card account

Oportun: A chance to build your credit history

Now that you know the facts about these common credit myths, you can learn about how Oportun may be able to help you if you’re looking for affordable credit options. Visit our homepage to learn about:

  1. Personal loans
  2. Credit cards
  3. Secured personal loans
  4. And more!



Consumer Financial Protection Bureau. What’s a credit inquiry?

Consumer Financial Protection Bureau. List of consumer reporting companies.

FICO. What’s in my FICO® scores?

Experian. Closed accounts and your credit history

Experian. Everything you need to know about credit-builder loans


The information in this site, including any third-party content and opinions, is for educational purposes only and should not be relied upon as legal, tax, or financial advice or to indicate the availability or suitability of any Oportun product or service to your unique circumstances. Contact your independent financial advisor for advice on your personal situation.

Credit cards through Oportun subject to credit approval. Terms may vary and are subject to change. The Oportun® Visa® Credit Card is issued by WebBank. The Oportun Credit Card is open to all consumers, except for residents in CO, DC, IA, MD, WI, and WV. See the Oportun Cardholder Agreement or the Oportun Cash Back Cardholder Agreement for details, including applicable fees.

Personal loans through Oportun subject to credit approval. Terms may vary by applicant and state and are subject to change. If you refinance, you may pay interest over a longer period of time or at a higher rate and the overall cost of your loan may be higher. Loans in CA, ID, MO, NM and WI are originated by Oportun, Inc. California loans made pursuant to a California Financing Law license. NV loans originated by Oportun, LLC. In AL, AK, AR, AZ, DE, FL, GA, HI, IL, IN, KS, KY, LA, MI, MN, MS, MT, NC, ND, NE, NH, NJ, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, VT, WA and WY loans are originated by Pathward®, N.A.. Terms, conditions, and state restrictions apply.

Ready to build a better future? Apply now.

Personal loans

You might also like

How to budget money on a low income What is investing? Tips and tricks for paying off credit card debt Six ways to raise your credit score We’re proud to reveal the new Oportun How to save money during your 20s Do I have too much debt? What is an installment loan? What is an interest rate?

Ready to build a better future? Apply now.

We use cookies to bring you the best experience on our site. We never sell your information to third parties. When you use our site, you agree to our cookies policy. Find out more.