Credit Score Myths Debunked

Your credit score is arguably the most important number in your financial life. It dictates whether you can buy a home, what interest rate you pay on a car, and even whether you can rent a specific apartment. Unfortunately, the rules surrounding credit scoring models like FICO and VantageScore are often misunderstood. Believing the wrong information can lead to expensive mistakes that lower your score and limit your borrowing power.

Here is a breakdown of the most persistent credit myths and the factual strategies you should use instead.

Myth 1: Checking Your Own Score Lowers It

This is perhaps the most common fear among consumers. Many people avoid looking at their credit reports because they believe the act of checking will deduct points. This is false.

To understand why, you must distinguish between two types of inquiries:

Hard Inquiries: This happens when a lender checks your credit to make a lending decision. For example, if you apply for a Sapphire Preferred card from Chase or a mortgage with Wells Fargo, that is a hard inquiry. These can temporarily lower your score by a few points.
Soft Inquiries: This happens when you check your own credit or when a lender checks your credit for a pre-approval offer.

Checking your own score is always a soft inquiry. You can check your score daily through services like Credit Karma, Experian, or your own bank’s mobile app without any penalty. In fact, checking regularly is the best way to spot fraud early.

Myth 2: You Need to Carry a Balance to Build Credit

There is a widespread belief that you must leave a small balance on your credit card at the end of the month to prove to lenders that you are using your credit. This is a dangerous myth that costs you money in interest.

The reality is that paying your balance in full every month is the best behavior for your score. The credit bureaus—Equifax, Experian, and TransUnion—look for “activity,” not “debt.” If you use your card for groceries and pay it off immediately, the activity is reported, and you build a positive history without paying a cent in interest.

Leaving a balance only increases your Credit Utilization Ratio, which is the amount of credit you are using compared to your limit. High utilization hurts your score. FICO data suggests that people with the highest credit scores (over 800) use an average of just 7% of their available credit limit.

Myth 3: Closing Old Cards Improves Your Score

When you finally pay off a credit card you no longer use, your instinct might be to close the account to “clean up” your finances. However, closing an old credit card can actually cause your score to drop significantly.

Your credit score relies heavily on two factors that closing a card disrupts:

Length of Credit History: 15% of your FICO score is based on the age of your accounts. If you close a card you opened in 2015, you stop the clock on that account’s age. Eventually, it falls off your report, shortening your average credit age.
Total Available Credit: If you have two cards with \$5,000 limits, your total available credit is \\$10,000. If you owe \$2,000, your utilization is 20%. If you close one card, your total limit drops to \\$5,000. That same \$2,000 debt now represents 40% utilization, which is high enough to damage your score.

Instead of closing the card, keep it open with a zero balance. You might put a small recurring charge on it, like a Netflix subscription, and set it to auto-pay just to keep the account active.

Myth 4: Your Income Affects Your Credit Score

You could earn \$200,000 a year and have a terrible credit score, or earn \\$30,000 a year and have a perfect 850 score.

Credit reporting agencies do not have access to your salary data. Your credit report lists your debts, your payment history, and public records like bankruptcies. It does not list your assets, savings accounts, or income.

However, income still matters for getting a loan. When you apply for a mortgage, the lender looks at your Debt-to-Income (DTI) ratio. They use your credit score to judge your reliability and your income to judge your ability to repay. While a raise won’t boost your FICO score, it will make you more attractive to lenders.

Myth 5: Paying Off a Collection Removes It From Your Report

If you have a bill that went to collections, you might assume that paying it off will immediately scrub the negative mark from your history. Sadly, this is rarely the case.

A collection account stays on your credit report for seven years from the date the debt first became delinquent. Changing the status from “unpaid” to “paid” looks better to a human underwriter, but it does not erase the history of the default.

There are two nuances to this:

Pay for Delete: In rare cases, you can negotiate with a collection agency to delete the record in exchange for full payment. You must get this agreement in writing before paying.
Newer Scoring Models: Newer models like FICO 9 and VantageScore 3.0 and 4.0 ignore paid collection accounts. However, many mortgage lenders still use older FICO versions that factor in paid collections.

Myth 6: Debit Cards Help Build Credit

Using a standard debit card from Bank of America or Chase creates no credit history whatsoever. When you use a debit card, you are spending your own money. No borrowing occurs, so no report is sent to the credit bureaus.

If you cannot get a traditional credit card, you should look for a Secured Credit Card. With a secured card, you place a cash deposit (usually \$200 to \\$500) that acts as your credit limit. Unlike a debit card, issuers of secured cards like the Discover it Secured or Capital One Platinum Secured report your payments to the bureaus, helping you build a score.

Myth 7: Rate Shopping Kills Your Score

When shopping for a mortgage or auto loan, you naturally want to compare rates from different lenders. Some borrowers are afraid to apply at multiple banks because they fear multiple hard inquiries will ruin their score.

The scoring models anticipate this behavior. If you apply for multiple mortgages, auto loans, or student loans within a specific window (typically 14 to 45 days, depending on the scoring model), those inquiries are grouped together and counted as a single inquiry.

This allows you to check rates with Rocket Mortgage, a local credit union, and a big bank without fearing a triple penalty. Note that this grouping rule applies to installment loans, not credit cards. Applying for five credit cards in one week will result in five separate hard inquiries.

Frequently Asked Questions

Does checking my credit score lower it? No. Checking your own score is a soft inquiry and has zero impact on your credit rating. You can check it as often as you like.

What is the fastest way to increase a credit score? The fastest method is usually lowering your credit utilization. If you can pay down balances so they are below 30% (or ideally 10%) of your limit, you may see a score increase as soon as the card issuer reports the new balance (usually once a month).

How long does negative information stay on my report? Most negative information, such as late payments, foreclosures, and collections, stays on your report for seven years. Chapter 7 bankruptcy can stay on your report for up to 10 years.

Is a credit score of 700 good? Yes, a score of 700 is generally considered “good.” FICO scores range from 300 to 850. A score above 740 is often considered “very good” or “excellent” and will qualify you for the best interest rates.