Five Common Credit Score Myths Busted

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Key takeaways

Knowing what’s a myth and what’s the truth about credit scores can help you build credit.
Common credit score myths include that checking your score is bad, carrying a balance is good, and if you get married your spouse’s credit will affect yours.
Building credit is simple. Pay your bills on time, keep your balances low, and don’t close old accounts unless they’re expensive.

Everyone knows credit scores are an important factor when it comes to qualifying for the best loans or being approved for the rewards card you’ve been eyeing. While most people know how important their credit score is, many don’t really understand how it works and what can hurt your score.

Misconceptions abound, causing unnecessary worry and sometimes even leading to actions that could harm one’s credit standing. To help put your mind at ease, we’ll explain the truth behind the five most common credit score myths and what you can do to raise your score.

We’ll also provide practical tips on what you can do to improve your score. By demystifying these common misunderstandings, you’ll be better equipped to manage your credit effectively and make informed financial decisions that benefit your overall financial health. Understanding these concepts is the first step toward achieving and maintaining a strong credit profile.

Let’s get started.

1. You can damage your credit score by checking it

Many people mistakenly believe that checking your credit score can negatively impact it. This myth likely stems from confusion between ‘hard’ and ‘soft’ inquiries. When you check your credit score yourself, it’s considered a ‘soft inquiry’. Soft inquiries have no impact on your credit score, meaning you can check your score as often as you like without worrying about any negative effects.

On the other hand, ‘hard inquiries’ occur when lenders check your credit report as part of their decision-making process for approving loans or credit cards. These hard inquiries can slightly lower your credit score temporarily because they indicate that you are seeking new credit, which might pose a risk to lenders.

It’s important to note that many banks and credit card issuers now offer free monthly access to your credit score as a part of their services. Taking advantage of these free checks can help you stay informed about your credit status and identify any potential issues early on.

By understanding the difference between hard and soft inquiries, you can monitor your credit health more effectively and make informed decisions without fear of unintentionally harming your score.

2. Carrying a balance boosts your score

There’s a common belief that maintaining a balance on your credit cards helps build your credit score. The reality is carrying a balance doesn’t improve your score; in fact, it can have the opposite effect. When you carry a high balance, you’re using a significant portion of your available credit, leading to a high credit utilization ratio. This ratio is a key factor in credit scoring. A high utilization ratio can signal to lenders that you may be overextended financially, which can negatively impact your score.

You want to maintain a low credit utilization ratio, ideally below 30%. This demonstrates to lenders that you are managing your credit responsibly and not relying too heavily on borrowed money.

A better strategy for improving your credit score is to pay off your balances in full each month. Not only does this keep your credit utilization low, but it also saves you money on interest payments, which can add up quickly if you only make minimum payments or carry a balance over time.

By paying off your balances regularly, you show that you can manage your finances effectively, which is a positive signal to credit scoring models and lenders alike. This practice can help you build a stronger credit profile and improve your financial health in the long run.

3. If your spouse has bad credit, yours will suffer

Many people worry that marrying someone with a poor credit history will drag their own score down. Luckily, this isn’t true. Your credit score is an individual measure of your creditworthiness and remains separate from your spouse’s score. Marrying someone with a bad credit score won’t directly affect your credit. However, it’s important to understand that while marriage itself does not merge credit scores, financial decisions made together as a couple can have implications.

For instance, opening joint accounts or co-signing loans, such as a mortgage, will tie your credit histories together. These joint financial commitments can impact both your scores. If your spouse misses a payment or defaults on a loan, it can negatively affect your credit score as well. Conversely, responsible management of joint accounts can help both of you build better credit over time. Therefore, it’s crucial to communicate openly about financial habits and work together to maintain good credit practices.

Additionally, while your individual scores remain separate, lenders may consider both of your credit histories when you apply for joint loans. Ensuring that both of you are aware of and actively managing your credit can lead to better financial outcomes and a stronger financial partnership. Understanding these nuances can help you navigate your financial future together without undue stress about your credit scores.

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4. Closing an unused credit card improves your score

It’s often thought that closing credit card accounts you no longer use will positively impact your credit score. It can feel good to be done with an old account and simply shut it down, but don’t.

This action can actually hurt your score. Closing a credit card account reduces your total available credit, which in turn increases your credit utilization ratio. Since the credit utilization ratio is a significant factor in your credit score, a higher ratio can negatively impact your score.

Moreover, closing an account can lower the overall age of your credit accounts. The length of your credit history is another important factor in determining your credit score. A longer credit history contributes to a higher score because it shows lenders a track record of how you manage credit over time. By closing an older account, you reduce the average age of your accounts, potentially lowering your score.

Therefore, it’s often better to keep older accounts open. This helps maintain your total available credit and preserves the length of your credit history. If you’re concerned about managing multiple accounts, you can keep the account open but use it occasionally for small purchases to keep it active, ensuring that you’re not inadvertently harming your credit score by closing it.

If the account comes with lots of fees, then it may be better to close it and take the hit to your score.

5. The less you use credit, the higher your score

Some people believe that avoiding the use of credit altogether will lead to a high credit score. The trouble with this approach is that credit scores are based on your history of managing credit. If you don’t use credit, there’s no data for the credit bureaus to base your score on. Without a credit history, lenders have no way to assess your creditworthiness, which can be just as problematic as having a low credit score.

Building a strong credit score requires demonstrating responsible credit usage over time. This includes making regular payments on time, maintaining low balances relative to your credit limits, and managing different types of credit accounts, such as credit cards, installment loans, and mortgages. These actions show lenders that you can handle credit responsibly, which in turn will increase your score.

Without engaging in these credit activities, you miss out on the opportunity to prove your creditworthiness. This can make it difficult to obtain loans, credit cards, or even favorable terms on services like insurance or rental agreements. Therefore, it’s important to use credit wisely rather than avoiding it entirely. By doing so, you can build a positive credit history that reflects your ability to manage credit effectively, ultimately leading to a higher credit score and better financial opportunities.

What affects your score

Now that we’ve gone over the common myths, let’s talk about what actually affects your score in more detail. There are two main credit scoring models FICO and VantageScore. Both use similar factors to determine your score, so if you have a good FICO score chances are extremely high you have a good VantageScore. FICO is used by over 90% of lenders so we’ll talk more in depth about this one.

FICO scores are calculated by weighing the following factors:

Payment history – 35%
Credit utilization – 30%
Length of credit history – 15%
Credit mix – 10%
New inquiries – 10%

How to build credit

We’ve talked about most of these factors in busting credit myths. Once again, always pay your bills on time. Even one late payment can have a significant effect on your score and stays on your report for up to seven years. The good news is its effect will lessen over time.

Keep your credit usage below 30% and you’re golden. Try to pay off your full balance every month. You can always make multiple payments throughout the month if that helps.

Length of credit history is basically keep old accounts open and active unless they’re too expensive.

The last two factors don’t affect your score as much but they’re still important to be aware of. Your credit mix refers to the types of accounts you have – credit cards, installment loans, auto loans, etc. Lenders like to see that you can handle different types of credit accounts responsibly. They want you to have a mix of installment credit (loans) and revolving credit (credit cards). While a mix is good, do not take on debt you cannot afford. This is a small percentage of your score. Going into debt will do much more damage to your score than not having a mix of accounts will.

The last factor refers to hard inquiries. Lender’s are wary if you open a lot of new accounts at once as it makes you look desperate for credit. You need to be strategic about what you apply for and when.

Try to prequalify for cards and loans whenever possible. Being prequalified does not guarantee you’ll be approved but it lets you get a sense of your odds. The financial institution will do a soft inquiry and look at your basic financial information to determine if you meet their requirements. By prequalifying, you can apply for cards and loans you know you have a better chance of being approved for.

If your application is denied, wait at least six months for your credit score to bounce back before you apply again.

Bottom line

Credit can be confusing, and there’s a lot of misinformation out there, but understanding it doesn’t have to be overwhelming. A few key practices can help you manage your credit effectively. First, always pay your balances off in full and on time. Timely payments are one of the most significant factors in maintaining a good credit score, as they demonstrate reliability to lenders.

Second, only use up to 30% of your credit limit. Keeping your credit utilization ratio low shows that you’re not overly reliant on credit, which is a positive indicator for your credit score. Additionally, resist the urge to close old accounts, even if you’re not using them. Keeping these accounts open can benefit your credit score by contributing to a longer credit history and a higher total available credit.

Lastly, remember that to build credit, you have to use credit. This doesn’t mean you should incur unnecessary debt, but rather, use credit responsibly to establish a positive credit history. If managing credit feels daunting, don’t hesitate to seek help. There’s plenty of advice and resources available to guide you. By being responsible and informed, you can navigate the complexities of credit and see your score rise steadily over time.

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27. To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Chime Checking Account. The qualifying direct deposit must be from your employer, payroll provider, gig economy payer, or benefits payer by Automated Clearing House (ACH) deposit OR Original Credit Transaction (OCT). Bank ACH transfers, Pay Anyone transfers, verification or trial deposits from financial institutions, peer to peer transfers from services such as PayPal, Cash App, or Venmo, mobile check deposits, cash loads or deposits, one-time direct deposits, such as tax refunds and other similar transactions, and any deposit to which Chime deems to not be a qualifying direct deposit are not qualifying direct deposits.

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29. Based on a representative study conducted by Experian®, members who made their first purchase with Credit Builder between June 2020 and October 2020 observed an average FICO® Score 8 increase of 30 points after approximately 8 months. On-time payment history can have a positive impact on your credit score. Late payment may negatively impact your credit score.

30. On-time payment history may have a positive impact on your credit score. Late payment may negatively impact your credit score. Chime will report your activities to Transunion®, Experian®, and Equifax®. Impact on your credit may vary, as Credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.

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32. SpotMe® on Debit is an optional, no fee overdraft service attached to your Chime Checking Account. To qualify for the SpotMe on Debit service, you must receive $200 or more in qualifying direct deposits to your Chime Checking Account each month and have activated your Visa debit card. Qualifying members will be allowed to overdraw their Chime Checking Account for up to $20 on debit card purchases and cash withdrawals initially but may later be eligible for a higher limit of up to $200 or more based on Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. The SpotMe on Debit limit will be displayed within the Chime mobile app and is subject to change at any time, at Chime’s sole discretion. Although Chime does not charge any overdraft fees for SpotMe on Debit, there may be out-of-network or third-party fees associated with ATM transactions. SpotMe on Debit will not cover any non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. SpotMe on Debit Terms and Conditions.

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35. Save When I Get Paid automatically transfers 10% of your direct deposits of $500 or more from your Checking Account into your savings account.

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Rachel Alulis

Rachel Alulis has been the lead editor for Moneyfor’s credit cards team since 2015 and for the financial rewards team since 2023. Before joining Moneyfor, Rachel worked at USA Today and the Des Moines Register. She then established a successful freelance writing and editing business specializing in personal finance. Rachel holds a bachelor’s degree in journalism and an MBA.