Debunking Common Credit Score Myths

Understanding your credit score can feel like navigating a maze. With so much information out there, it’s easy to stumble upon myths that cloud the truth. Let’s clear the air by addressing some of the most common credit score misconceptions in a calm, straightforward way. Knowing the facts can help you make informed decisions about your financial health.

Myth 1: Checking Your Credit Score Hurts It

One of the most persistent myths is that checking your own credit score will lower it. This simply isn’t true. When you check your credit score through a bank, credit card issuer, or free service, it’s considered a soft inquiry. Soft inquiries don’t impact your score at all. In contrast, hard inquiries—like those from lenders when you apply for a loan or credit card—can cause a small, temporary dip. So, feel free to monitor your score regularly to stay on top of your financial progress.

Myth 2: Closing Old Accounts Boosts Your Score

You might think closing unused credit cards or old accounts will tidy up your credit report and improve your score. Actually, the opposite can happen. Closing accounts reduces your available credit, which can increase your credit utilization ratio—the amount of credit you’re using compared to your total limit. A higher ratio can lower your score. Plus, old accounts contribute to the length of your credit history, a factor that positively influences your score. If an account has no annual fee, keeping it open and using it occasionally might be a smarter move.

Myth 3: You Only Have One Credit Score

It’s easy to assume you have a single, universal credit score, but that’s not the case. You actually have multiple scores, depending on the credit bureau (Equifax, Experian, TransUnion) and the scoring model used (like FICO or VantageScore). Each bureau may have slightly different information about your credit history, leading to variations in scores. Lenders may use different models depending on the type of credit you’re applying for, so your score can vary. The good news? The core factors—payment history, credit utilization, and length of credit history—matter across all models.

Myth 4: Paying Off Debt Erases Negative Marks

Paying off a debt is a great step, but it doesn’t automatically erase negative marks like late payments or collections from your credit report. These marks can stay for up to seven years, though their impact lessens over time. The best approach is to focus on consistent, on-time payments moving forward and keeping your credit utilization low. Over time, positive habits will outweigh older negatives, helping your score recover.

Myth 5: You Need to Carry a Balance to Build Credit

A common misconception is that you need to carry a credit card balance to improve your credit score. In reality, carrying a balance doesn’t directly help your score and can cost you in interest. What matters most is paying your bills on time and keeping your credit utilization low. If you can pay off your card in full each month, that’s ideal. It shows lenders you’re responsible without the extra cost of interest.

Myth 6: Income Affects Your Credit Score

Your income might influence your ability to get approved for credit, but it doesn’t directly affect your credit score. Credit scores are based on how you manage credit—things like payment history, debt levels, and credit mix. While a higher income might make it easier to pay bills on time, it’s your actual payment behavior that shapes your score, not the size of your paycheck.

Final Thoughts

Credit scores don’t have to be mysterious. By separating fact from fiction, you can take control of your financial journey with confidence. Focus on the basics: pay on time, keep your credit usage low, and check your reports regularly for accuracy. If you’re unsure where to start, consider pulling your free credit report from a trusted source or speaking with a financial advisor. Small, steady steps can lead to big improvements over time.