There is a lot of confusion about credit scores. People believe many things, most of which are nonsense, and being misinformed can sometimes prevent them from obtaining a loan, credit card, or rental property. This article will clear up a few common credit score myths. So, without further ado, let’s get those myths out of the way so you can have a firmer grasp on your finances!
Myth 1: Checking Your Own Credit Score Will Lower It
One of the most common credit score myths is that checking your own score will hurt it. This is not true.
When you check your score, it’s called a “soft inquiry.” Soft inquiries have no effect on your score. Only “hard inquiries” — like the ones lenders make when you apply for a loan or credit card — may affect your score slightly.
In fact, checking your score regularly is a smart habit. It helps you spot mistakes, track your progress, and stay alert for signs of fraud. You can do a credit report check online to see where you stand.
Myth 2: You Need to Carry a Credit Card Balance to Build Credit
Some people think they need to leave a balance on their credit card to build a good score. This is not true either.
You don’t have to pay interest to grow your credit score. In fact, the best thing to do is to pay your credit card bill in full every month. This shows that you are responsible and can manage credit well.
Carrying a balance can cost you extra money in interest and may even lower your score if your balance is too high compared to your credit limit.
Myth 3: A Higher Income Means a Higher Credit Score
Your salary does not impact your credit score directly. You can earn a high income and still have a low score, or earn a low income and have a great score.
What matters is how you handle your credit. Your score depends on things like your payment history, how much credit you use, the length of your credit history, and whether you’ve applied for new credit recently.
So, focus on managing your accounts well, not on your income.
Myth 4: Closing Old Credit Cards Helps Your Score
It might seem like closing old credit cards would help your score, but this is often the opposite of what happens.
When you close an old card, you lose the credit limit from that account, which may raise your overall credit usage. You also reduce the average age of your accounts, which can affect your score.
Unless there’s a good reason (like high fees), it’s usually better to keep old credit cards open, even if you don’t use them much.
Myth 5: Paying Off a Loan Erases It from Your Credit Report
Paying off a loan is great, but it won’t remove the account from your credit report right away. In fact, it will stay there for several years.
If you made your payments on time, that’s good news. A closed loan account with a positive payment history will help your score.
Only negative items like missed payments or defaults can lower your score, and even those fall off after a certain time, usually 7 years.
Myth 6: Only Credit Cards Matter for Your Score
While credit cards are one part of your credit profile, they’re not the only thing that counts.
Loans such as car loans, home loans, and personal loans also affect your score. Having a mix of different types of credit can actually help improve your score, as long as you manage them well.
The key is to pay all your bills on time and avoid taking on too much debt at once.
Myth 7: You Need a Credit Repair Agency to Improve Your Score
Many companies claim they can “fix” your credit quickly, for a fee. But most of the time, they can’t do anything you can’t do on your own.
You don’t need to pay someone to improve your credit. Start by checking your report for errors, paying your bills on time, lowering your credit card balances, and avoiding new debt unless needed.
If you need help, you can talk to a certified credit counsellor instead of using paid repair services that might not be honest.
Myth 8: A Bad Score Lasts Forever
Having a bad credit score can feel stressful, but it’s not permanent.
Your credit score changes as your habits change. If you start paying on time, reduce your debt, and stop applying for too much new credit, your score will slowly go up. It may take a few months or even a couple of years, but it will improve.
So don’t give up — your past does not have to define your financial future.
Myth 9: Debit Cards Help Build Credit
Most individuals believe a debit card helps establish credit. It doesn’t.
Debit cards are attached to your bank account. They don’t require you to borrow money, so they’re not reported on your credit report. In order to establish credit, you must use credit products such as credit cards or loans and manage them responsibly. If you’re new to credit, a secured credit card is a secure place to start.
Myth 10: Credit Scores Are the Same Everywhere
Depending on where it is checked, a credit score may slightly differ from one another. Different credit bureaus exist, and they might use slightly different information or even different formulas. Hence, it is good practice to check your score every now and then from more than one bureau, especially if one intends to apply for a loan.
Final Thoughts
The Internet is chock-full of misinformation about credit scoring. Believe these myths, and you may set yourself back in life. Now that you know the truth about credit scores, take these steps to establish credit or strengthen your score. Don’t fall for these myths; stay informed and keep your fingers on the steering wheel.
