Credit scores play a crucial role in financial health, but there’s a lot of misinformation out there. Believing myths about credit can hurt your financial future, while understanding the truth can help you make better money decisions.
Let’s debunk five common myths and reveal five essential truths about credit scores.
Myth #1: Checking Your Credit Score Hurts It
Truth: Checking your own credit score does NOT lower it. This is called a “soft inquiry” and has no impact on your score. Only “hard inquiries” from lenders (like applying for a loan or credit card) can temporarily lower your score.
Myth #2: Closing Old Credit Cards Will Improve Your Score
Truth: Closing a credit card can actually hurt your score by reducing your available credit and shortening your credit history. If you don’t use a card often, keep it open with a small recurring charge to maintain a healthy credit profile.
Myth #3: You Need to Carry a Balance to Build Credit
Truth: You do NOT need to carry a balance or pay interest to build credit. Paying off your balance in full each month shows responsible credit use and helps improve your score.
Myth #4: Your Income Affects Your Credit Score
Truth: Your income is NOT a factor in your credit score. While lenders consider your income when approving loans, credit bureaus only look at factors like payment history, credit utilization, and account age.
Myth #5: All Debts Affect Your Credit Score the Same Way
Truth: Different types of debt impact your score differently. Credit card debt affects your credit utilization, while installment loans (like auto or student loans) help build credit history when paid on time.
Truth #1: Payment History Is the Biggest Factor in Your Score
Your payment history makes up about 35% of your credit score. Paying bills on time is the single most important thing you can do to maintain a strong score.
Truth #2: Credit Utilization Should Stay Below 30%
Credit utilization—how much of your available credit you’re using—should ideally stay under 30%. Keeping your balances low relative to your credit limits helps boost your score.
Truth #3: A Mix of Credit Accounts Can Help Your Score
Having a mix of credit types (credit cards, auto loans, mortgages, etc.) shows that you can manage different forms of credit responsibly, which can positively impact your score.
Truth #4: Late Payments Can Stay on Your Report for Up to 7 Years
One late payment can hurt your credit score and remain on your credit report for up to seven years. Setting up autopay or reminders can help ensure on-time payments.
Truth #5: You Can Improve Your Credit Score Over Time
No matter where your credit score is now, you can improve it with consistent good habits—paying on time, keeping balances low, and maintaining a long credit history.
Final Thoughts
Understanding the truth about credit scores empowers you to make smarter financial choices. By avoiding these myths and focusing on proven credit-building strategies, you can maintain a strong score and open doors to better financial opportunities.
What’s a credit score myth you’ve heard before? Share in the comments!