Top Credit Report Myths with Neile Simon

What do Bigfoot and credit reports have in common? They’re each the subject of many myths.We don’t know much about 8-foot furry creatures, but we can dispel some of the folklore about credit and credit reports. Neile Simon is here to help us do that today.Neile Simon is a Certified Credit Counselor with Christian Credit Counselors (CCC), an underwriter of Faith & Finance.If you've ever wondered whether closing a credit card boosts your score or if credit counseling hurts your credit, you're not alone. Let's dive into these common misconceptions and separate fact from fiction.Myth #1: Paying Off Debt Instantly Improves Your Credit ScoreIt’s a common belief that paying down debt will immediately result in a perfect credit score. However, credit improvement takes time because credit scores are based on your payment history.Reality: Your credit report gives lenders a snapshot of how responsibly you've managed debt over time. Consistently paying bills on time is the best way to build and maintain a strong score—but it won’t happen overnight.Tip: Be cautious of anyone claiming they can “fix” your credit instantly. No legitimate company can erase negative (but accurate) information from your credit history overnight.Myth #2: Credit Counseling Destroys Your Credit ScoreMany people worry that seeking credit counseling will harm their credit score.Reality: Enrolling in a credit counseling program is a neutral mark on your credit report and does not directly affect your score. Closing accounts impacts your score, so working with an accredited nonprofit organization is essential to develop a plan that keeps your credit intact. That’s why Christian Credit Counselors is the only organization we recommend for credit counseling and debt management. Tip: Avoid paying for expensive credit monitoring or identity protection services. You can monitor your credit for free through reputable sources.Myth #3: Canceling Credit Cards Boosts Your ScoreMany people believe that closing old or unused credit cards is a responsible move, but it can actually hurt their credit scores.Reality: Lenders want to see two or three active credit lines. Closing credit cards reduces your available credit, which can negatively impact your score by increasing your credit utilization ratio (the percentage of available credit you're using).Tip: Keep zero-balance accounts open unless they charge an annual fee. If you must close an account, do so gradually—perhaps one every six months—to minimize the temporary impact on your score.Myth #4: Too Many Inquiries Hurt Your ScoreWhile excessive hard inquiries (when lenders check your credit for a loan or credit card application) can lower your score, not all inquiries count against you.Reality: Credit bureaus recognize rate shopping—for example, when you're comparing mortgage or auto loan rates. If you make multiple inquiries within a 45-day window, they count as one single inquiry, not multiple.Tip: Always shop around for the best loan terms without worrying about multiple hits to your credit score.Myth #5: Checking Your Own Credit Report Hurts Your ScoreMany consumers avoid checking their credit reports because they fear it will negatively impact their scores.Reality: Checking your own credit is a "soft inquiry" and does not affect your score. Only "hard inquiries" (such as applying for a loan or credit card) can impact your score.Tip: Review your credit report every 6–12 months to catch errors or fraud early. Get a free report from AnnualCreditReport.com, the only official site for free credit reports.Myth #6: Credit Scores Are Locked In for Six MonthsSome believe their credit score is only updated periodically, leading to confusion when making financial decisions.Reality: Your credit score is dynamic, meaning it updates as new information is reported—not every six months. Changes in balances, payments, and account activity can impact your score as soon as they are reported by creditors.Tip: If you're working on improving your score, be patient and consistent—your efforts will show over time.Myth #7: If I Pay My Bills on Time, I Don’t Need to Check My Credit ReportIt seems logical that paying your bills on time means your credit report is in good shape. But that’s not always the case.Reality: 80% of credit reports contain errors. Mistakes like incorrect account information or fraudulent activity can damage your score even if you've never missed a payment.Tip: Check your credit report at least once a year to identify errors and dispute inaccuracies before they hurt your financial standing.Myth #8: All Credit Reports Are the SameMany people assume that if they check one credit report, they’ve seen them all.Reality: There are three major credit bureaus—Equifax, Experian, and TransUnion—and they all calculate scores differently. Some lenders may pull from only one bureau, while others check all three.Tip: Review reports from all three bureaus to get a complete picture of your credit history and spot discrepancies.Myth #9: A Divorce Decree Automatically Removes You from Joint AccountsDivorce proceedings often divide assets and debts, but that does not automatically separate joint accounts.Reality: If you and your former spouse share a loan or credit account, both of you remain responsible for the debt—even if a court assigns the balance to one person.Tip: To protect yourself, close joint accounts or refinance loans to remove your ex-spouse’s name. Simply relying on a court order won’t protect your credit.Myth #10: Bad Marks Automatically Disappear After Seven YearsMany assume that negative information automatically falls off their report after seven years, but it's more complicated than that.Reality: Some items, like Chapter 7 bankruptcies, remain on your report for 10 years, while Chapter 13 bankruptcies stay for seven years. Paid-off accounts in good standing can remain for 10 years, which benefits your credit history.Tip: If you have negative marks on your report, focus on building positive credit habits to minimize their impact over time.Myth #11: I Can Pay Someone to “Fix” My CreditCredit repair companies often promise quick fixes, but many of their claims are misleading.Reality: No company can legally remove accurate negative information from your credit report. If a debt is legitimately yours, it will stay on your report until its expiration date.Tip: You can dispute errors yourself for free. Christian Credit Counselors provides free resources and sample dispute letters to help you correct inaccuracies.The Truth About Credit ReportsUnderstanding your credit report and score is essential for financial success. By debunking these myths, you can take control of your credit and make informed financial decisions.Check your credit report regularly for errorsKeep credit card accounts open to maintain a strong scoreShop around for loans without worrying about multiple inquiriesWork with trusted advisors, not credit repair scamsIf you're struggling with credit card debt, Christian Credit Counselors can help. They’ve helped thousands of people get out of debt 80% faster while honoring their financial obligations.Visit ChristianCreditCounselors.org or call 800-557-1985 to learn more.On Today’s Program, Rob Answers Listener Questions:I have a $50,000 home equity line of credit with $40,000 currently owed. I'm in school for one more year and have had to draw $1,000-$2,000 from the line every couple of months to cover expenses. My interest rate is 2.6%. I was wondering if I could use the equity in my home to pay off this debt and get some extra cash to help me through the rest of school.Resources Mentioned:Faithful Steward: FaithFi’s New Quarterly MagazineChristian Credit CounselorsAnnualCreditReport.comWisdom Over Wealth: 12 Lessons from Ecclesiastes on Money (Pre-Order)Look At The Sparrows: A 21-Day Devotional on Financial Fear and AnxietyRich Toward God: A Study on the Parable of the Rich FoolFind a Certified Kingdom Advisor (CKA) or Certified Christian Financial Counselor (CertCFC)FaithFi App Remember, you can call in to ask your questions every workday at (800) 525-7000. Faith & Finance is also available on Moody Radio Network and American Family Radio. You can also visit FaithFi.com to connect with our online community and partner with us as we help more people live as faithful stewards of God’s resources. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.