8 credit score myths you need to stop believing

Unlike fictional ghosts and goblins, your credit score is very real and inextricably tied to your financial health. But, there are plenty of misconceptions out there about what that three-digit number really means.

So just in time for Halloween, here are seven credit score myths (and the truths that lurk beneath the surface) -- so you don't reel in horror next time you check your score.

Myth 1: You only have one credit score.

The Truth: The credit industry uses many different scoring models to generate consumer credit scores. Lenders, creditors, and other third parties don't all use the same formula, and they weigh the information contained in your credit report differently. To complicate matters, the information used to calculate your credit score may vary based on the credit bureau supplying your report (see myth number two to learn more).

In short, there's no one true credit score. However, the same factors tend to affect your credit score regardless of scoring model. You can read more about how to read your credit report here.

Myth 2: All credit reports contain the same info.

The Truth: There are three major credit bureaus: Experian, Equifax, and TransUnion. All three maintain separate credit reports on consumers. Each version of your credit report may not contain all of the same information. Some reports will be more detailed than others, and the information may vary because some companies don't report activity to all three credit bureaus.

Myth 3: Checking your credit report hurts your credit score.

The Truth: This myth is partially based in fact--when a lender or creditor initiates a hard inquiry into your credit, that inquiry does land on your credit report and ding your credit score a few points (the lasting damage is minimal as long as you don't submit too many credit applications in too short a time frame). But hard inquiries only occur when you apply for credit.

Checking your own credit report doesn't affect your credit score in any way, so knock yourself out.

Myth 4: Debt is bad for your credit score.

The Truth: Taking on too much debt and missing loan payments is bad for your credit score, but simply having debt is not harmful at all. In fact, responsibly managing a mix of debt types shows lenders and creditors that you are a low credit risk, and will raise your credit score over time. Borrowing is often necessary to get a car, buy a home and build credit, so debt itself is not something to fear.

But, if you are looking to pay off your debt, here are six easy steps to get you started.

RELATED: 5 terrible financial decisions that will haunt you for life:

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Sitting on the markets sideline

While the stock market is soaring to new highs, half of Americans are being left out of the gains. Bankrate found that only 46% of adults have money invested and only 18% of the youngest adults are involved in the market.

While many people fear losing money, the true concern should lie in missing out a potential fortune. Over the long-term, a well-balanced portfolio will always come out with a net gain. With compound interest at stake, investing as early as possible is the smartest move. 

If you're not already in the stock market, now is the time to start. If you have a longer investment period in mind, it could make sense to take on more risk.

Not having a rainy day fund

There are so many things that can go wrong in life and someone who is smart with their finances will be prepared for anything. Expensive emergencies like a car breaking down or a medical emergency can happen whether you are ready for it or not.

Experts recommend your emergency savings be able to support you for three to six months. That's a conservative estimate for how long it takes to find a new job after being fired, for instance.

Having enough money in an easily accessible emergency fund prevents you from taking out loans in desperation or from going into debt.

Waiting to pay off debt

After investments and emergency savings, you may feel your paycheck dwindling. That feeling will only get worse if you don't pay off outstanding debts. 

From student loans to mortgage payments, debts are pesky. But the thorn will only get sharper over time if you ignore them.

A team of researchers writing in the Harvard Business Review this year suggested paying off the largest debts with the highest interest rates first. Credit card interest rates are notoriously high, so paying those off before going after more manageable debt, like student loans, may be a smart move.

If you're stressed out by debt, these strategies may help.

Not asking for a pay raise

Bankrate found that only 48% of working Americans got a bump in salary over the last year, and often because they aren't asking for it. 

Chickening out of a salary negotiation, especially at the beginning of your career, could cost you $1 million in lifetime earnings.

By understanding your worth and the value you provide at work, you can earn more every year and maybe even retire early. If your company won't give you that raise, it may be time to search for a new job where you are payed in accordance to your value.

Spending too much money

Overspending is a problem many people fall victim to, but you shouldn't spend all the money you make, according to Eric Roberge, a certified financial planner and founder of Beyond Your Hammock

"Spending right at your means, even if you don't go over and spend more than you earn, is like trying to take a race car up to 200 miles an hour with a warped wheel," he wrote in an article on Business Insider.

"If anything goes wrong — you hit a bump, you swerve, whatever — you're done. There's no second option when you're going full throttle in your financial life. There's no safety net."

Leaving room in your budget to save some of your earnings will set you up so you're not scrambling for money when you need it most.

In other words, learn to live below your means.

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Myth 5: You should close old credit cards.

The Truth: If you can't hang onto a credit card without maxing it out or missing payments, you should close it to avoid getting into trouble. But if you no longer use an old credit card, you're better off leaving it open. The length of your credit history and your debt utilization ratio are two factors that affect your credit score, so keeping an old credit card open with a zero balance will benefit both.

Myth 6: Paid-off debts no longer affect your credit score.

The Truth: Even after they're paid off, debts can remain on your credit report and affect your credit score for up to seven years. If you always paid your debt on time and managed it responsibly, this is a good thing. But if you were frequently late on payments or the account went to collections, this can drag down your credit score for years to come. Check out these seven good behaviors that can actually mess with your credit.

Myth 7: Bankruptcy wipes the slate clean.

The Truth: Bankruptcy can help you discharge debts you can't afford and get your finances in order. But when it comes to your credit score, bankruptcy is devastating. Bankruptcies can stay on your credit report for seven or 10 years, depending on the type. And while it's possible for your credit to recover, bankruptcy will affect your credit score until it falls off your credit report.

Myth 8: Money can buy a good credit score.

The Truth: Having a lot of money can make it easier to achieve a good credit score, but it's no guarantee. People with high incomes can have terrible credit, and people without a lot of money can have great credit. Income is not a determining factor; it's more important to live within your means and always make your payments on time.

Want to get a jump-start on fixing your credit? Check out these five ways to improve your credit in 30 days or less.

This article originally appeared on Policygenius and was syndicated by MediaFeed.org.

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