Maneuvering the world of credit scores can feel like trying to decode a secret language. But don’t worry; we’re here to bust some myths and give you the straight facts in a way that won’t bore you. Get ready for these 14 common misconceptions about credit scores as we uncover the truth behind them.
Checking Your Credit Score Lowers It
Think peeping at your credit score drops it? False alarm! Checking your score is considered a soft inquiry and doesn’t affect it. Feel free to check as often as you’d like without fear of damaging your credit health.
You Need to Carry a Credit Card Balance to Build Credit
The myth that you must carry a balance to boost your credit score is as persistent as it is wrong. Paying off your balance in full each month shows you’re a responsible borrower and can help improve your score over time.
Closing Old Credit Cards Boosts Your Score
Closing an old credit card might feel like cleaning the house, but it can lower your score by reducing your overall credit limit and increasing your credit utilization ratio. Keep those old accounts open to maintain a longer credit history.
All Debt is Bad Debt
Not all debt is created equal. Credit scoring models can differentiate between high-risk debt like credit card balances and “good” debt like student or mortgage loans that can improve your credit profile if managed responsibly.
Income Affects Your Credit Score
Your paycheck’s size doesn’t sway your credit score. Credit bureaus are more interested in how reliably you pay your bills, not how much you earn. So, high earners can have poor scores, and modest earners can boast top-notch scores.
Paying Off a Debt Removes It From Your Report
Clearing a debt doesn’t erase the history. Paid debts can stay on your report for up to seven years, but showing you’ve cleared up past dues can work in your favor by demonstrating financial responsibility.
You Only Have One Credit Score
Surprise! You have multiple credit scores. Different credit bureaus and scoring models can generate different scores based on their unique criteria, so don’t be shocked if you see variations across various platforms.
Credit Repair Companies Can Fix Everything
While credit repair companies can help dispute errors on your credit report, they can’t magically fix legitimate dings. Beware of promises that sound too good to be true—they usually are.
Marrying Someone Merges Your Credit Scores
Saying “I do” doesn’t mean your credit scores become one. Credit scores are tied to individuals, not couples. However, joint accounts and co-signed loans will affect both partners’ credit reports.
Your Job History Influences Your Score
Your resume doesn’t impact your credit score. While lenders may consider your employment history when making lending decisions, your credit score doesn’t consider your job or career changes.
Rent Payments Don’t Count Toward Your Score
It’s historically accurate, but not anymore! Some credit scoring models now include rent payments. If you’re a renter, services that report rent payments to credit bureaus can help you build credit.
Utility Bills Will Always Help Build Credit
Paying the lights on time doesn’t automatically boost your credit score. However, those utility bills can become delinquent accounts and harm your score if you’re late. Some services can report positive utility payment history but are not standard.
You Need a Perfect Score to Get the Best Rates
Chasing a perfect score of 850 is like hunting a unicorn. Lenders typically offer the best rates to those in the top credit tiers, not just those with a perfect score. Rest easy knowing “excellent” credit is perfectly sufficient.
All Credit Inquiries Hurt Your Score
There are two types of inquiries: hard and soft. Hard inquiries happen when a lender checks your credit for a loan application and can slightly lower your score. Like checking your score, soft inquiries have no effect. So, when shopping for loans, keep those inquiries within a short window to minimize their impact.
