Despite the critical importance of the credit score in American financial life, misconceptions about how these three-digit numbers work remain remarkably persistent. Even financially savvy consumers often operate under false assumptions about what builds or damages their credit score. These myths can lead to counterproductive behaviors that might actually harm your financial standing rather than improve it. This comprehensive guide separates fact from fiction, debunking the most common credit score myths while providing accurate information about what truly influences your creditworthiness.
Understanding the Basics: What Actually Makes Up Your Credit Score
Before addressing specific myths, it’s important to understand the genuine factors that determine your credit score. The FICO scoring model, which is used in over 90% of lending decisions, bases your credit score on five key components:
- Payment history (35%): Whether you’ve paid past credit accounts on time
- Amounts owed (30%): The total amount of credit and loans you’re using compared to your total credit limit
- Length of credit history (15%): How long you’ve been using credit
- New credit (10%): Frequency of credit inquiries and new account openings
- Credit mix (10%): The variety of credit products you have
With this foundation in mind, let’s examine and correct the most prevalent credit score myths.
Myth #1: Checking Your Own Credit Score Lowers It
This is perhaps the most persistent credit score myth, causing many consumers to avoid monitoring their own credit.
The Truth:
Checking your own credit score creates what’s known as a “soft inquiry” which has absolutely no impact on your score. You can check your personal credit score daily if desired without any negative consequences.
What does affect your credit score are “hard inquiries”—credit checks performed by lenders when you apply for new credit. These typically lower your credit score by 5-10 points for a short period.
The Smart Approach:
- Monitor your credit score regularly through free services offered by credit card issuers, banks, or credit monitoring services
- Review your full credit reports from all three bureaus annually at AnnualCreditReport.com
- Be strategic about applications for new credit to minimize hard inquiries
Myth #2: Carrying a Credit Card Balance Improves Your Credit Score
Many consumers believe they need to maintain a balance on their credit cards to build their credit score.
The Truth:
Carrying a balance on your credit cards does not help your credit score and often hurts it by increasing your credit utilization ratio. Credit scoring models favor low utilization rates—typically below 30%, with optimal scores associated with utilization under 10%.
Furthermore, carrying balances costs you money in interest charges, which can compound over time.
The Smart Approach:
- Use credit cards regularly to establish payment history
- Pay your balances in full each month before the due date
- Keep your utilization ratio low by using only a small percentage of your available credit
- If you can’t pay in full, pay as much as possible above the minimum payment
Myth #3: Closing Unused Credit Cards Helps Your Credit Score
When streamlining finances, many people assume closing unused credit cards will benefit their credit score.
The Truth:
Closing unused credit cards often harms your credit score in two ways:
- It reduces your total available credit, potentially increasing your utilization ratio
- When closed accounts eventually fall off your credit report (after 7-10 years), it can reduce the average age of your accounts
The exception is if an unused card charges high annual fees that outweigh its credit score benefits.
The Smart Approach:
- Keep older credit cards open, especially those with no annual fee
- Use each card occasionally (once every few months) to prevent the issuer from closing it due to inactivity
- If you must close cards, start with newer ones with lower credit limits
- Consider downgrading annual-fee cards to no-fee versions instead of closing them
Myth #4: Your Income Affects Your Credit Score
Many people believe that higher income automatically translates to a better credit score.
The Truth:
Income is not directly factored into credit score calculations. You won’t find income information on your credit reports, and the scoring algorithms don’t consider how much you earn.
However, income indirectly affects your ability to make payments and your debt-to-income ratio, which lenders consider separately from your credit score when evaluating loan applications.
The Smart Approach:
- Focus on factors that actually impact your credit score, regardless of income level
- Live within your means to ensure on-time payments
- Apply for credit limits that are manageable relative to your income
- Understand that high-income individuals can have poor credit scores, while moderate-income individuals can achieve excellent scores through responsible habits
Myth #5: Paying Off Collections Immediately Removes Them from Your Credit Report
When facing collection accounts, many consumers believe paying them will immediately remove the negative mark from their credit report.
The Truth:
Paid collections generally remain on your credit report for seven years from the date the account first became delinquent, whether they’re paid or unpaid. However, newer credit score models (FICO 9 and VantageScore 3.0 and 4.0) do ignore paid collections, giving them zero negative impact on your credit score.
Many lenders still use older scoring models that penalize even paid collections, though the impact diminishes over time.
The Smart Approach:
- Pay or settle collection accounts when possible, as this prevents potential legal action and improves your standing with newer scoring models
- Consider requesting “pay-for-delete” agreements, though creditors aren’t obligated to remove accurate information
- Focus on adding positive information to your credit report through responsible use of active accounts
- Allow time to heal your credit score as the negative impact of collections diminishes
Myth #6: Having Multiple Credit Cards Is Bad for Your Credit Score
Some financial advisors recommend limiting the number of credit cards to maintain a good credit score.
The Truth:
Having multiple credit cards can actually benefit your credit score when managed responsibly. Additional cards can:
- Increase your total available credit, potentially lowering your utilization ratio
- Diversify your credit mix
- Provide more opportunities to establish positive payment history
The key is using them responsibly—having 10 maxed-out credit cards will significantly damage your credit score.
The Smart Approach:
- Add new credit cards strategically and gradually
- Focus on quality over quantity, selecting cards with valuable benefits and no annual fee
- Space out applications to minimize the impact of multiple hard inquiries
- Use each card occasionally while keeping overall utilization low
- Consider the “garden” approach: acquire the cards you want, then stop applying for new credit and let your credit score grow
Myth #7: Co-Signing a Loan Only Puts the Other Person’s Credit at Risk
When asked to co-sign a loan, many people don’t realize the potential impact on their own credit score.
The Truth:
When you co-sign a loan or credit card, the entire account appears on your credit report as if it were your own. Late payments, high balances, or defaults will damage your credit score just as much as the primary borrower’s.
Additionally, the loan counts toward your debt obligations, potentially affecting your ability to qualify for your own credit in the future.
The Smart Approach:
- Co-sign only if you’re willing and able to take on the debt yourself if necessary
- Monitor the account regularly to ensure on-time payments
- Set up account alerts to notify you of late payments or high balances
- Understand your state’s laws regarding co-signer rights and responsibilities
- Consider alternatives like adding the person as an authorized user on your credit card, which provides more control
Myth #8: Disputing Information Removes It From Your Credit Report
Some credit repair companies suggest that disputing information will automatically remove it from your credit report, improving your credit score.
The Truth:
The dispute process is designed to correct inaccurate information, not to remove legitimate negative items. When you dispute information:
- The credit bureau investigates the claim with the data furnisher
- If the information cannot be verified or is determined to be inaccurate, it must be removed
- If the information is verified as accurate, it remains on your report
Filing frivolous disputes can waste time and may be considered attempted fraud.
The Smart Approach:
- Dispute only genuinely inaccurate or outdated information
- Provide documentation supporting your dispute when possible
- Be specific about which information you’re disputing and why
- Consider working with a legitimate credit counseling agency rather than a “credit repair” company promising quick fixes
- Focus on building positive credit history rather than trying to remove accurate negative information
Myth #9: Your Credit Score Drops When You Get Married
Many newlyweds worry about the impact of marriage on their credit score.
The Truth:
Getting married itself has no direct impact on your credit score. Credit reports and scores remain individual—there is no such thing as a joint credit score or merged credit report, even after marriage.
However, any joint accounts or co-signed loans you open with your spouse will appear on both credit reports and affect both scores.
The Smart Approach:
- Maintain individual credit accounts even after marriage to build separate credit histories
- Discuss credit histories openly before combining finances
- Consider keeping some accounts separate if one spouse has significantly better credit
- Make joint financial decisions with an understanding of how they’ll affect each person’s credit score
- Review both spouses’ credit reports regularly
Myth #10: Paying Utilities and Rent Always Builds Your Credit Score
Many consumers believe that paying regular bills like utilities, rent, and phone bills automatically improves their credit score.
The Truth:
Traditionally, these payments haven’t been reported to credit bureaus and therefore haven’t affected your credit score—whether you pay on time or late. However, this is changing:
- Some newer credit score models include rent and utility payment data when available
- Services like Experian Boost allow consumers to add utility and streaming service payments to their Experian credit report
- Some landlords and property management companies now report rent payments to credit bureaus
- Late utility payments that go to collections will negatively impact your credit score
The Smart Approach:
- Consider opt-in services that report your utility and rent payments
- Maintain perfect payment history on these accounts, as reported late payments will hurt your score
- Don’t rely solely on these alternative data sources—establish traditional credit accounts as well
- Ask your landlord if they report rent payments to credit bureaus, or use a third-party service like RentTrack or PayYourRent
Myth #11: All Credit Scores Are the Same
Many consumers don’t realize that they have multiple credit scores that may differ significantly.
The Truth:
You have dozens of different credit scores. Variations include:
- Different models (FICO vs. VantageScore)
- Different versions (FICO 8, FICO 9, FICO 10, etc.)
- Different bureaus (Equifax, Experian, TransUnion)
- Industry-specific scores (auto lending, credit card, mortgage)
These scores can vary by 20-50 points or more based on the same underlying credit data.
The Smart Approach:
- Understand which credit score a lender will use for specific applications
- Focus on the factors that improve all scores rather than a specific number
- Monitor scores from multiple sources to get a complete picture
- Ask lenders which bureau and scoring model they use when making lending decisions
- For major loans like mortgages, review all three FICO scores that lenders typically evaluate
The Truth About Credit Score Improvement
Beyond these myths, it’s important to understand what actually helps improve your credit score over time:
Effective Credit-Building Strategies
- Consistent on-time payments for all accounts, which gradually builds the most important component of your credit score
- Low credit utilization, keeping revolving account balances under 30% of limits, ideally under 10%
- Length of credit history, allowing accounts to age naturally and avoiding closing older accounts
- Limited new credit applications, spacing applications at least 3-6 months apart
- Credit mix diversity, demonstrating ability to manage different types of credit (revolving and installment)
The Timeline Reality
Perhaps the biggest myth is that credit score improvement happens quickly. The truth is that meaningful improvement typically takes time:
- Minor negative factors might resolve in 3-6 months
- Serious negative items like late payments impact your credit score for up to 7 years
- Bankruptcies can affect your credit score for up to 10 years
- Building from no credit to excellent credit typically takes 2-3 years of consistent positive behavior
Final Thoughts: Evidence-Based Credit Management
Making decisions based on credit score myths can cost you money and slow your progress toward financial goals. Instead, focus on understanding the actual factors that influence your credit score and implement evidence-based strategies to build and maintain excellent credit.
Remember that your credit score is ultimately a reflection of responsible financial management over time—there are no magic shortcuts or quick fixes, despite what some companies might promise.
For more information about optimizing your financial health, explore our guides on improving your credit score, selecting the right credit cards, and creating a personal financial plan that supports your long-term goals.
