Myths About Bad Credit You Should Stop Believing

When it comes to personal finances, few topics are as misunderstood as bad credit. Myths and misconceptions abound, often leading people to make poor decisions or give up on improving their financial health altogether. Whether you’re working to repair your credit score or trying to avoid common pitfalls, understanding the truth behind these myths is essential. Here, we debunk some of the most persistent myths about bad credit that you should stop believing.

Myth 1: Bad Credit is Forever

Many people wrongly assume that once your credit is damaged, it’s beyond repair. The truth is, credit reports are not set in stone. Negative entries like defaults or missed payments do impact your score, but they aren’t permanent. In Australia, most adverse listings drop off your report after five to seven years, and with consistent financial responsibility, your score can gradually improve. Tip: Start by making small, on-time repayments and reducing your credit card balances – even these simple actions can make a significant difference over time.

Myth 2: Checking Your Credit Report Hurts Your Score

This is one of the most common misunderstandings. When you check your own credit report, it’s called a “soft inquiry” and it has absolutely no impact on your score. Only “hard inquiries” — such as those made by lenders when you apply for a loan or credit card — can temporarily lower your credit score. In fact, regularly reviewing your credit report is a smart financial habit. It helps you spot errors, track your progress, and detect any signs of identity theft early.

Myth 3: You Can’t Get Approved for Loans with Bad Credit

While having a low credit score may reduce your chances with traditional lenders, it doesn’t mean you’re out of options. There are reputable providers in Australia who understand that life happens — and they offer financial products tailored to people with less-than-perfect credit. In urgent situations, some borrowers turn to 1 hour cash loans to manage short-term expenses. These types of loans offer quick access to funds, though they should always be approached with caution and used responsibly.

Myth 4: Closing Credit Accounts Will Boost Your Score

Many believe that shutting down unused credit cards automatically improves their credit rating. However, this can sometimes have the opposite effect. One of the key factors in your credit score is your credit utilisation ratio — the amount of credit you’re using compared to your total limit. Closing accounts reduces your available credit, which can raise this ratio and negatively impact your score. Instead of cancelling old accounts, consider keeping them open (especially if they have no annual fees) and simply avoid using them unless necessary.

Myth 5: You Only Have One Credit Score

In Australia, there are multiple credit reporting agencies — including Equifax, illion, and Experian — and each may have slightly different information on file. That means you may have more than one credit score. It’s a good idea to request a free copy of your report from each agency annually to get a complete picture of your financial standing.

Myth 6: Paying Off a Default Removes It from Your Credit Report

Paying off a default is always the right thing to do, but unfortunately, it doesn’t erase it from your credit history immediately. Instead, your report will show that the debt has been paid, which looks much better to future lenders than an unpaid default — but the listing itself will remain for up to five years from the date of default.

Bad credit can feel like a heavy burden, but it’s not a life sentence

By staying informed, separating fact from fiction, and making deliberate financial choices, you can take meaningful steps toward a healthier credit future. Don’t let outdated myths hold you back — the journey to better credit starts with knowledge.