Myths About Credit & Lending

Written by Rebecca Feeley

Liz Maccarone and Julia Strayer from Merrill Lynch Wealth Management led a fascinating round-table discussion recently on the Myths and Mistakes of Financial Planning. Myths with regard to Credit & Lending was of particular interest to all in attendance, so I thought I’d share a few things that I learned…

Myth #1: Closing unused credit cards is good for your credit.

This is not necessarily true. Longevity of credit plays a big part in your credit score. The higher the average age of your accounts, the better it is for your score. In other words, closing a long-standing credit card account can have a temporary negative impact on your credit score.

Myth #2: Once a delinquent loan or credit balance is paid off, it is removed from your credit report.

Depending on the delinquency, negative marks on your credit report can stay there for up to 10 years. For instance, the late payment of a bill will remain on your credit report for 7 years from the original deliquency date. This is why it is SO important pay bills on time EVERY time.

Myth #3: Checking your credit report will hurt your score.

Only “hard” inquiries will have a negative impact on your credit score. Examples of hard inquiries would be credit checks for credit card or loan applications. When you check your own credit score using a site like Credit Sesame, it is considered a “soft” inquiry and will not negatively affect your score.

Hope you learned something new!