Editors' pick: Originally published April 27.

For a concept as integral to Americans' daily lives as credit, it's astonishing so many myths exist. Perhaps it's the complexity of our credit system or the lack of financial education in our country. Either way, consumers stand to lose a lot of money if they believe the common misconceptions about credit that prevail today.

In order to avoid bad credit, high interest rates and a number of other costly consequences, these are the five credit myths that need to be dispelled once and for all.

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1. You only have one credit score

It's commonly believed that every adult has one credit score. FICO is the most common credit scoring model, but the truth is that dozens of models exist, each with its own algorithm and purpose.

Ibrahim Dusi, chief risk officer at financial wellness company Payoff, explained that while most lenders examine at least one of your FICO scores when making a decision, "you actually have at least three different FICO credit scores, including one from each of the major credit bureaus."

To add to the confusion, he said, there may be significant differences in what information each bureau has, resulting in a different score depending on the source.

Those considering a loan or line of credit should first investigate their credit scores from the three major bureaus - Equifax, Experian, and TransUnion - to ensure their scores are within a healthy range and fairly consistent. A single score based on missing information or an error could result in a denied application.

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2. Payment history is all that matters

Though payment history is the largest determining factor in a FICO credit score, it is only one of five. According to Dusi, it's not uncommon for a consumer to expect that because they've never missed a payment, their score should be near-perfect.

"We frequently hear this when talking with potential Payoff members," he said. "While it is really important to have a great payment history, it doesn't mean that alone is enough to give you an excellent FICO score."

Consumers who are aiming for excellent credit must also consider the other factors that impact their scores, including amounts owed, length of credit history, credit mix, and new credit.

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3. Shopping for the best rates will lower your score

When it comes to a significant debt obligation such as a mortgage or car loan, the interest rate on that loan can mean the difference between a good deal and thousands of dollars in unnecessary charges. However, borrowers are often wary of shopping around for the best interest rates due to the fear that multiple credit inquiries will damage their credit.

However, that fear is largely unfounded. "FICO specifically provides an exception for auto loans, student loans and mortgages," said Peter Neeves, Ph.D., a financial expert at CentSai.com. "These are loans which consumers frequently rate shop. FICO recognizes this and does not count each inquiry against your score."

As long as these inquiries are made within a short timeframe, they will be treated as one and not have a cumulative effect on credit.

"It is important to know there are a lot of FICO score models - they produce generally similar but not identical results," Neeves explained. "Newer models will use a 30-day period where inquiries for an auto loan, or mortgage, or student loan are considered as one inquiry ... even with the older models still in use -- most common with auto -- there is still at least 14 days of protection, where all inquiries within a 14-day period are treated as a single inquiry." 

It's important to note, however, that this is not the case for credit cards and other revolving lines of credit, for which multiple inquiries within a short period of time can have a damaging impact on credit.

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4. You should carry a balance to improve your score

It's true that the U.S. credit system rewards consumers for responsibly taking on debt. Unfortunately, the specific behaviors that result in a positive credit history are often misinterpreted.

Liran Amrany, founder of personal finance application Debitize, said the most common credit myth he's heard when speaking with consumers is that carrying a credit card balance month-over- month helps build credit.

"While you do build credit faster by showing some utilization, the bureaus report your statement balance, not the balance you carry month to month," he said. "Not paying your full balance really just ends up costing you unnecessary interest fees."

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5. Checking your own credit will harm your scores

One of the best ways consumers can maintain and protect their credit is by checking their credit reports and scores regularly. Doing so helps catch errors as well as instances of fraud, which if left unresolved, can leave lasting damage.

Unfortunately, again, many people don't bother to monitor their own credit for fear of harming their scores with multiple inquiries.

However, according to Michelle Black, an author and expert at credit education and restoration program HOPE4USA, these "soft" credit pulls are treated differently than inquiries performed by lenders.

"Hard inquiries, the types of credit pulls which occur when you apply for a loan or service, are the only types of inquiries which have the potential to damage your credit scores," she said. "In fact, not only can you check your credit reports often without fear of damaging your credit scores, you should." 

Annualcreditreport.com is currently the only source of free credit reports authorized by the federal government. Consumers can request their reports from the three major bureaus once per year.

Additionally, there are several websites that provide free credit scores. However, consumers will have to pay a service in order to see their official FICO scores from the three bureaus. Generally, however, a healthy credit report will translate to a high score and it's not necessary to pay for ongoing credit score monitoring.

The benefits of having a good credit score are numerous, but the path to good credit is one fraught with myths and misconceptions. By becoming educated about how credit works, Americans can avoid mistakes that end up costing them in the long run and preserve their wealth along the way to retirement.

This article is commentary by an independent contributor.