Debunking Common Credit MythsDebunking Common Credit MythsPhoto courtesy of GlamourWhen it comes to your finances, understanding credit and how it works can be one of the most confusing and frustrating aspects. Myths and misconceptions about credit scores run rampant, so it can be difficult to know what’s what. Even if you have the best intentions, it can end up being costly to make a mistake as a result of not understanding how credit works. Here are 6 of the most common credit myths, debunked.1: Closing a lot of credit cards will improve my credit score.Your credit score takes the average length of your credit accounts into consideration, so closing a credit card you’ve had for a long time can actually have a negative impact on your score. Your score is also determined based on the amount of available credit you have, so closing a credit card with a high credit limit can decrease your debt-to-available-credit ratio. Try to avoid closing too many credit cards at once and consider just putting some of your credit cards aside so you can leave them open without actually using them. Photo courtesy of Digital Brainiac2: I don’t have any credit cards or debt, so I must have a good credit score.A lack of credit or debt can actually make you appear unfavorable in the eyes of a lender. Lenders gauge your creditworthiness based on your history of responsible credit use. A limited history of credit (and on-time payments) can actually result in a lower score and a lender seeing you as a risky borrower. However, there are steps you can take to build your credit from scratch.Photo courtesy of Brimg3: Checking my credit report will lower my credit score.Checking your own credit report is considered a “soft inquiry” and will have no effect on raising or lowering your credit score. You can check your credit report annually for free with each of the 3 bureaus (Transunion, Experian, and Equifax).4: I always pay my bills on time – therefore I must have a high credit score.While payment history does make up a significant portion of your credit score, other factors are taken into consideration as well. Your credit score is also determined by your length of credit history, amount owed, types of credit, and number of credit inquiries.5: I make a lot of money, so I must have a good credit score.Your income or the amount of money you have saved in the bank has no bearing on your credit score, other than the fact that this may enable you to make your minimum monthly payments. Other information that is not included on your credit report is your ethnicity, criminal record, political affiliation, religion, medical history, and gender.6: With a bad credit score, I can never get a loan.This is not necessarily true. While it will certainly be more difficult, there are companies willing to lend to people with lower scores. However, you will likely have a higher interest rate than someone with good credit. An alternative is to have someone cosign a loan for you, though this option should be approached with caution.When it comes to your finances, knowledge is power. Educating yourself on how to build the perfect credit history will turn you into a prime candidate for things like a mortgage or personal loan. Now that you know some of the most common myths about credit, get to work on boosting your score! Leslie TayneLeslie H. Tayne has more than 15 years' experience in the practice area of consumer and business financial debt-related services. Speaker, Author of Life & Debt, Attorney and Founder of the Tayne Law Group, P.C., Leslie is working towards reshaping the debt industry by offering real, proven solutions to help her clients get back on the road to financial freedom.