Credit Score Myths Explained: What Really Affects Your Credit Score
Credit scores play a critical role in personal finance in the United States. They influence whether you qualify for credit cards, personal loans, auto loans, mortgages, and even rental housing. Despite their importance, credit scores are often misunderstood, leading many people to make financial decisions based on myths rather than facts.
Believing the wrong information about credit scores can slow your financial progress, increase borrowing costs, and damage long-term financial health. This article explains the most common credit score myths, clarifies how credit scores actually work, and helps you focus on actions that truly improve your credit profile.
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What Is a Credit Score?
A credit score is a numerical measure of your creditworthiness. It is designed to predict how likely you are to repay borrowed money on time. In the United States, most credit scores range from 300 to 850, with higher scores indicating lower risk to lenders.
The most widely used scoring models are FICO and VantageScore. While their formulas differ slightly, both rely on similar factors:
• Payment history
• Credit utilization
• Length of credit history
• Credit mix
• New credit inquiries
Understanding these factors is essential before addressing common myths.
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Myth #1: Checking Your Own Credit Score Lowers It
This is one of the most widespread credit score myths.
The Truth
Checking your own credit score does not lower your credit score. When you review your credit score or credit report, it is classified as a soft inquiry, which has no impact on your credit.
Soft inquiries occur when:
• You check your own credit score
• A lender pre-approves you for an offer
• An employer conducts a background check
Only hard inquiries, which happen when you apply for new credit, can slightly affect your score and even then, the impact is usually small and temporary.
Why This Myth Is Harmful
People who avoid checking their credit may miss errors, fraudulent activity, or early warning signs of financial trouble. Regularly monitoring your credit is a healthy financial habit.
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Myth #2: Carrying a Balance Improves Your Credit Score
Many people believe that leaving a balance on their credit card helps build credit. This is incorrect.
The Truth
You do not need to carry a balance to build or maintain a strong credit score. In fact, paying your credit card balance in full each month is usually better for your credit and your finances.
Credit scoring models reward:
• On-time payments
• Low credit utilization
Carrying a balance increases your utilization ratio and leads to unnecessary interest charges.
What Actually Helps
Using your credit card regularly and paying it off on time is enough to demonstrate responsible credit behavior.
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Myth #3: Closing Old Credit Cards Always Improves Your Credit
Some people assume closing unused credit cards will automatically boost their credit score.
The Truth
Closing old accounts can sometimes hurt your credit score rather than help it.
Closing a credit card may:
• Increase your credit utilization ratio
• Shorten your average credit history
Both factors can negatively affect your score.
When Closing a Card Makes Sense
Closing a card may be reasonable if it has:
• High annual fees
• Temptation to overspend
• Fraud or security concerns
Otherwise, keeping older accounts open especially with no balance can benefit your credit profile.
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Myth #4: Income Affects Your Credit Score
Income is an important part of your financial life, but it does not directly affect your credit score.
The Truth
Credit scores do not consider:
• Salary
• Job title
• Net worth
• Employment status
Your credit score reflects how you manage borrowed money, not how much you earn.
Why This Matters
High-income individuals can still have poor credit if they miss payments or carry excessive debt. Conversely, people with modest incomes can maintain excellent credit by managing credit responsibly.
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Myth #5: Paying Off a Collection Instantly Removes It from Your Credit Report
Dealing with collections is stressful, and many people believe paying them off will immediately fix their credit.
The Truth
Paying a collection does not automatically remove it from your credit report. In most cases, the account will remain on your report for up to seven years, though it may be marked as “paid.”
However, paid collections are generally viewed more favorably than unpaid ones, especially by newer scoring models and lenders.
Best Practices
• Request a pay-for-delete agreement when possible
• Prioritize newer or smaller collections
• Focus on rebuilding positive credit activity afterward
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Myth #6: You Only Have One Credit Score
Many consumers assume they have a single, universal credit score.
The Truth
You actually have multiple credit scores. Different lenders use different scoring models and versions depending on the type of credit.
For example:
• Mortgage lenders often use older FICO models
• Credit card issuers may use newer versions
• Auto lenders may use industry-specific scores
This explains why your score may vary across platforms.
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Myth #7: Paying Off All Debt Immediately Boosts Your Score
Eliminating debt is a positive financial goal, but the effect on your credit score can vary.
The Truth
Paying off high-interest debt is beneficial, but closing all accounts at once may temporarily reduce your score by lowering credit diversity or shortening credit history.
Credit scoring models favor active, well-managed credit, not the absence of credit.
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What Actually Improves Your Credit Score?
Instead of focusing on myths, prioritize these proven actions:
1. Pay Bills on Time
Payment history is the most important factor in credit scoring.
2. Keep Credit Utilization Low
Aim to use less than 30% of your available credit, and ideally under 10%.
3. Maintain Long-Term Accounts
Older accounts help establish a strong credit history.
4. Limit New Credit Applications
Too many hard inquiries in a short period can lower your score temporarily.
5. Monitor Your Credit Regularly
Checking your credit helps detect errors and track progress.
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Final Thoughts
Credit score myths can lead to poor financial decisions and unnecessary stress. Understanding how credit scores really work allows you to focus on behaviors that genuinely improve your financial standing.
Checking your own credit does not hurt your score, carrying a balance is unnecessary, and income alone does not determine creditworthiness. By replacing myths with accurate information, you can build strong credit, qualify for better financial opportunities, and reduce borrowing costs over time.
Strong credit is not built overnight but with consistent, informed habits, it is entirely achievable.