10 Common Credit Score Myths Debunked
(And What You Should Know)
Introduction
When it comes to managing your finances, one of the most important numbers you'll ever come across is your credit score. It can impact everything from your ability to get a loan to the interest rate you'll pay on that loan. But despite its significance, many people still get things wrong when it comes to credit scores. Whether you're trying to buy a house, secure a car loan, or simply improve your financial standing, understanding your credit score is key.
The problem? There are countless myths about what affects your credit score—and many of them could be steering you in the wrong direction. These myths often lead people to make financial decisions that can hurt, rather than help, their credit.
In this article, we're going to clear up 10 of the most common credit score myths and explain what you should actually be doing to improve and maintain a healthy credit score.
1. Myth #1 – Checking Your Credit Score Lowers It
Let’s start with one of the most common misconceptions: the idea that checking your own credit score will lower it. This is completely false.
When you check your credit score, it’s known as a “soft inquiry.” This type of inquiry doesn’t affect your credit score in any way. It’s important to check your credit regularly to make sure there are no errors or fraudulent activities, and the good news is you can do this without worry.
However, when a lender checks your score (for example, when you apply for a loan), it’s called a “hard inquiry.” Hard inquires can cause a slight dip in your score, but the effect is usually temporary and minimal. The key takeaway here is that checking your own score will never hurt it.
Tip: Use services like Credit Karma or annualcreditreport.com to check your credit for free. Monitoring your credit regularly can help you stay on top of any changes or potential issues.
2. Myth #2 – You Need to Carry a Balance to Improve Your Credit Score
Another widespread myth is that carrying a balance on your credit card will help boost your score. It’s actually the opposite—carrying a balance can hurt your score, especially if you carry a high balance relative to your credit limit.
Your credit utilization ratio (the amount of credit you're using compared to your total available credit) plays a major role in your credit score. The lower this ratio, the better. Ideally, you should aim to use less than 30% of your available credit.
Paying off your credit card balances every month, ideally before the statement date, is the best way to improve and maintain a strong score. Not only will you avoid interest charges, but you'll also keep your credit utilization in check.
Tip: Set up automatic payments or reminders to pay off your balances in full every month. This will keep your score healthy while saving you money on interest.
3. Myth #3 – Closing Old Accounts Will Boost Your Score
You might think that closing old or unused credit accounts is a good way to improve your score, but this is another myth. Closing an account actually hurts your score for a couple of reasons.
First, the length of your credit history is an important factor in your score. The longer your history, the better. Closing an old account shortens your overall credit history, which can negatively impact your score.
Second, closing accounts reduces your total available credit, which can raise your credit utilization ratio. This could lead to a decrease in your score, especially if you have balances on other cards.
Tip: If you have old credit cards that you no longer use, leave them open, but don’t carry a balance. This will help your credit utilization ratio and contribute to your credit history length.
4. Myth #4 – A Good Credit Score Guarantees Loan Approval
While having a good credit score can definitely improve your chances of getting approved for a loan, it’s not a guarantee. Lenders look at a variety of factors when deciding whether to approve you for a loan, and your credit score is just one piece of the puzzle.
Lenders also consider things like your income, debt-to-income ratio, and employment status. Even with a great credit score, if you have a lot of debt or a low income, a lender may hesitate to approve your loan.
Tip: Keep your finances in order by budgeting, reducing debt, and saving for emergencies. This will give you a better shot at approval—along with your credit score.
5. Myth #5 – Credit Scores Are Only Based on Debt
A lot of people assume that your credit score is primarily based on how much debt you have, but this isn’t entirely accurate. While debt plays a role, there are other factors that contribute to your score.
FICO, the most commonly used credit scoring model, considers several elements, including:
Payment history (35%) – Whether you’ve paid your bills on time.
Credit utilization (30%) – How much of your available credit you’re using.
Credit history length (15%) – How long your credit accounts have been open.
Types of credit (10%) – A mix of different types of credit (credit cards, loans, etc.).
New credit (10%) – The number of recent credit inquiries and new accounts.
Tip: To improve your score, focus on making timely payments, using credit responsibly, and diversifying your credit types when possible.
6. Myth #6 – All Credit Scores Are the Same
Not all credit scores are created equal. While most people think of the FICO score when they talk about credit, there are actually several different scoring models, including FICO and VantageScore.
The key difference is how they weigh the various factors that contribute to your score. For example, FICO may give more weight to payment history, while VantageScore might emphasize credit utilization.
Additionally, lenders may use different scoring models based on what type of loan you’re applying for, so it’s important to know which score the lender is using.
Tip: Check both your FICO and VantageScore to get a clearer picture of your credit health.
7. Myth #7 – You Can’t Improve Your Score Quickly
A common belief is that improving your credit score takes years, but that’s not necessarily true. There are ways to boost your score relatively quickly if you know what to focus on.
If you have high credit card balances, paying them down can give your score a noticeable boost. Disputing any errors on your credit report can also improve your score fairly quickly. Additionally, becoming an authorized user on someone else’s credit card (with a good payment history) can help improve your score as well.
Tip: If you’re looking to boost your score in the short term, focus on paying down high-interest debt and disputing any inaccuracies on your credit report.
8. Myth #8 – Your Credit Score Is Only Affected by Credit Cards
Many people think that credit scores are only affected by credit card usage, but this is far from the truth. In fact, your credit score is impacted by all types of credit accounts, including:
Mortgages
Car loans
Student loans
Personal loans
Utility payments (if reported)
Even things like rental history can influence your score if they're reported to the credit bureaus.
Tip: Keep all types of credit in good standing by making on-time payments, not just credit cards. If you have loans or other types of credit, they should be treated with equal care.
9. Myth #9 – If You Have a Low Score, You’re Stuck
A low credit score doesn’t mean you’re stuck with it forever. Many people have successfully improved their scores over time with the right strategies.
The key to rebuilding your credit is to make responsible financial decisions, like paying off outstanding debt, using credit responsibly, and ensuring there are no mistakes on your credit report.
Tip: Start by making small, achievable goals like paying down a specific credit card balance or disputing any inaccuracies on your report. Gradually, you’ll see your score improve.
10. Myth #10 – Your Credit Score is the Only Thing Lenders Look At
While your credit score is important, it’s not the only factor that lenders consider when reviewing your application. They’ll also look at things like:
Income – How much money you make each month or year.
Debt-to-income ratio – How much debt you have relative to your income.
Employment history – How stable your job situation is.
Having a good credit score will give you an edge, but it’s your overall financial situation that will ultimately determine whether you’re approved for a loan.
Tip: Keep your finances balanced by managing debt, maintaining a steady income, and saving for unexpected expenses. It’s not just about the score—it’s about your overall financial health.
Conclusion
Credit scores can feel like a mystery, but understanding the facts is the first step to improving yours. By debunking these 10 common myths, you can make smarter decisions about your credit and work toward achieving a score that opens doors to better financial opportunities.
Remember, a good credit score doesn’t happen overnight—but with consistent effort, it’s absolutely within your reach. Stay informed, pay your bills on time, and keep your credit utilization low, and you'll be on the right path.
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