The Biggest Credit Score Myths People Still Believe

Your credit score can often feel mysterious. Where does this number even come from? How is it determined?

Advice from friends, family, and social media can make the answer feel even more confusing. It can be difficult to know which financial habits actually improve your credit score and which may hurt it. That uncertainty is one reason so many credit score myths have stuck around long after they should have disappeared.

First, it’s important to understand the purpose of a credit score in the first place. A credit score is designed to help lenders predict how likely you are to repay borrowed money based on information in your credit report. That number, typically ranging from 300 to 850, can affect whether you qualify for a loan or credit card, as well as the interest rate that you’re offered. To improve your credit score, there is no simple one-time action that will help. Rather, it usually comes down to consistently managing your credit well over time.

“Credit scores can seem complicated because there are a lot of factors working together,” says Analicia Booth, Community Banker at Amplify Credit Union. “But the fundamentals are pretty simple: pay on time, keep your balances within your budget, and regularly review your credit reports so you know what lenders are seeing.”

Here, we’ll review some of the most common credit score myths and clarify what actually affects your credit.

Myth #1: Checking your credit hurts your score.

This myth has persisted for far too long, but it’s useful to understand where it comes from.

There are two types of credit checks: a soft inquiry and a hard inquiry. 

A soft inquiry does not affect your credit score and is used for things like background checks, account reviews, or when a lender checks your credit for informational purposes. A soft inquiry may also happen when you check your own credit or when an existing lender reviews your accounts.

A hard inquiry usually happens when you apply for new credit, such as a credit card, auto loan, or mortgage. As part of the application, the lender checks your credit report to help them in the approval decision. A hard inquiry can affect your credit score, but even then, the impact is usually small.

When you check your own credit, that is considered a soft inquiry, meaning there is no effect on your credit score. In fact, it’s recommended to check your credit reports regularly to ensure the information they contain is accurate. 

Myth #2: Carrying a credit card balance helps build credit.

While myth #1 is misleading, this myth can actually damage your financial health. 

You may have heard that leaving a small credit balance from one month to the next proves you can manage debt and therefore builds credit. This is a classic credit myth that carries no truth. The fact is that you can, and generally should, if possible, build credit without paying interest on a balance.

The important distinction to make is between using credit and carrying debt. As Booth notes, “Paying interest is not a requirement for building credit. You can use a credit card, pay the statement balance in full, and still demonstrate responsible credit management. Carrying debt from month to month only serves to make your purchases more expensive.”

Part of this myth may come from the fact that credit scores reward a history of successfully managing different types of credit. For instance, if your only installment loan is a car loan and you successfully pay it off, you might see a drop in your credit score because you no longer have an active installment loan.

However, that does not mean that carrying credit card debt from month to month will improve your score. You can pay off your statement balance in full each month while still building a positive payment history. Paying in full also helps you avoid interest, and keeping your reported balances low can lower your credit utilization ratio.

Myth #3: Closing an old credit card is always good for your credit.

It’s almost always in your best interest to pay off your credit cards. However, closing an old credit card immediately after you’ve achieved a zero balance can sometimes backfire and cause your credit score to drop.

The explanation: your credit utilization ratio. If you have two cards with a combined credit limit of $10,000 and you have a total balance of $2,000, your credit utilization ratio is 20%. A common guideline is to keep this ratio below 30%, although lower utilization is generally better. So, if you close one of these cards with a $5,000 limit but keep the same total balance, your credit utilization ratio suddenly jumps to 40% and your credit score can suffer. 

While there are still legitimate reasons to close a card, such as a high annual fee or difficulty controlling your spending, consider the impact on your available credit first. 

Myth #4: A higher income means a higher credit score.

While making more money can make it easier to pay bills and manage debts, how much you earn each month does not directly factor into your credit score. 

Credit scoring models look at information in your credit reports, such as payment history, how much you owe, the length of your credit history, the number of new accounts you’ve opened, and the different types of credit you manage.

It’s absolutely possible to manage credit well, even if you don’t make a six-figure salary. And the inverse is also true. Many high earners have poor credit after missing payments or incurring high balances.

It should be pointed out that lenders may still consider your income in relation to your debts when determining whether to approve you for a loan (this is known as your debt-to-income ratio, or DTI), but this is an entirely separate calculation from your credit score.

Myth #5: You only have one credit score.

Contrary to what you may have heard, there is no single credit score that follows you around everywhere. You can have multiple scores because there are several scoring models, and your score may be calculated using information from one of the Big Three credit bureaus: Experian, Equifax, or TransUnion.

As such, the score you see in a credit monitoring app may be different from the one your lender sees when you apply for a mortgage or an auto loan. To add another curveball, your scores can also change as new information is reported.

Rather than worrying about small differences between scores, it’s more beneficial to pay attention to the broader picture. Check your credit report regularly to make sure the information that feeds into your score is accurate. It’s the best way to ensure that, whatever your score is, it reflects your true creditworthiness.

Focus on Financial Habits, Not Credit Score Myths

As we’ve seen, you don’t need to carry a credit card balance to build good credit. Checking your own credit report won’t damage your score. And closing an old credit card is not always the best choice.

Instead of relying on common credit score myths to gauge whether your financial choices are good or bad, focus on the behaviors that matter most over the long run: pay your bills on time, keep your debt under control, borrow only what you can afford to pay back, and regularly review your credit. Understanding what actually affects your credit score can make it easier to make financial decisions based on facts, not outdated myths.