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What are some common myths about credit?

Have you heard that checking your credit score can cause it to drop? If so, you're not alone. This is one common myth about your credit score. Checking your credit score will not change it because it is counted as a "soft inquiry." If a lender inquired on your credit score, it would be considered a "hard inquiry." It is possible that could lower your score slightly. Here are some other myths about your credit:

-- Paying off a debt will send your credit score up by 50 points.

Your credit score is determined by many factors and a complex algorithm is used to calculate it. It would be near impossible to determine how much your score would change by altering just one factor.

-- Closing accounts that are old or not used anymore will help.

For some people, closing an old account will shorten your credit history, and that might make a credit score drop slightly. For others, closing an account might help raise a credit score slightly.

-- Paying off a debt will take it off your credit report.

When an account is closed, whether it is a negative or positive account, will not remove it from your credit record. Instead, the account will simply be listed as paid. A negative paid account is likely going to continue to affect your score until the credit union purges it from your credit record.

Credit scores and reports can be very complex. It is almost impossible to know how something will truly affect your score. The best option is to make on-time payments and not overextend yourself with credit.

If you are in financial trouble and don't know what to do, an attorney can provide you with information on your legal options, including bankruptcy.

Source: Chase.com, "Credit Myths and Misconceptions," accessed May 10, 2017

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