Popular credit myths debunked

Category: Credit

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There are some common misunderstandings when it comes to credit, and it can be easy to become overwhelmed by all the different information that is out there. If you are just establishing your credit for the first time, it can be especially unclear as to what’s factual and what isn’t. This article debunks some of those common credit myths:

Myth #1:

Your credit score goes down five points for every hard inquiry made.

Fact: When your credit report is pulled and an inquiry is made, it is either a hard inquiry or a soft inquiry. Soft inquiries do not affect your credit; an example of a soft inquiry would be a review of your credit report for rental housing. Hard inquiries, on the other hand, occur when you apply for any line of credit, such as a loan or credit card. Hard inquiries do affect your credit score, but the effects are minimal and are often temporary, especially if they aren’t made too often. However, there is no set number when it comes to hard inquiries, and while you may see a slight drop in your score, it won’t always be by five points.

Myth #2:

Your credit score will go up if your salary increases.

Fact: A higher annual salary can help you to qualify for certain loans and credit card offers, but your credit score won’t actually go up as a result of a salary increase.

Myth #3:

I filed for bankruptcy, and my credit will never be good again.

Fact: Bankruptcy should be avoided and only used as a last resort. If you did have to file, your credit will suffer as a result, but it isn’t permanent. A bankruptcy filing can only remain on a consumer’s credit report for up to 10 years, and once it is removed, the individual can begin rebuilding credit and should eventually see an increase in his or her credit score.

Myth #4:

My home address affects my credit score, so I should keep that in mind before I move.

Fact: Your state, city, or even your zip code can affect a lot of financial aspects of your life—car insurance rates, property taxes, and the overall cost of living. However, one thing it does not affect is your credit score.

Myth #5:

If I receive help from a credit counseling agency, my credit score will go down.

Fact: If you’re just receiving advice from a credit counseling agency, you won’t see any change in your credit score. However, if you begin negotiating settlements and balances with your creditors, your score may be adjusted accordingly.

Myth #6:

If your credit score is 850, you can qualify for any type of loan or credit card offer.

Fact: Not necessary. Although 850 is the highest FICO score, lenders will often take other factors into consideration, other than credit score, when making any credit decisions. A perfect credit score doesn’t always translate to perfect credit, and while a score of 850 will certainly give you a great chance at receiving the lowest rates and best offers, it’s not always a guarantee.


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Nothing above is meant to provide financial, tax, or legal advice. You should meet with appropriate professionals for such services.

Tags: bankruptcy, Credit Cards, credit counseling, Credit Score

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