Some people treat checking their credit score like a red button that’ll blow up their financial stability. They believe your score takes a nosedive each time you take a peek. This misconception has caused many to avoid monitoring their credit entirely out of fear that they’re accidentally sabotaging themselves.
Fact: Checking your own credit is what’s called a “soft inquiry,” and soft inquiries don’t affect your credit score one bit. The confusion often comes from “hard inquiries,” which happen when a lender checks your credit for a loan or credit card application. Keeping an eye on your score is not only harmless but smart for keeping tabs on your financial health.
It’s easy to assume that your income would directly affect your credit score. After all, isn’t borrowing money easier when you have more coming in? Many believe that a bigger paycheck automatically equals a higher credit score; conversely, earning less must mean bad credit, right?
Fact: Your income has zero direct effect on your credit score. Credit bureaus don’t even know how much you earn. Instead, your score depends on your credit habits, like your payment history, how much credit you use, and how long you’ve had accounts. High income or not, responsible credit behavior is what really matters.
Some people believe that maxing out their credit card shows they’re “using” credit to its fullest potential, which they think directly translates to building a strong credit score. It seems logical, right? Use it all, pay it off, get rewarded.
Fact: Maxing out your credit card is a fast track to damaging your score, not building it. A key factor in your credit score is your credit utilization ratio, which ideally should remain below 30%. If you’re regularly using all the credit you’ve got, lenders may see you as overextended and risky, which tanks your score.
A surprising number of people think leaving a little balance on their credit card each month somehow improves their score. The idea that carrying debt proves you’re a responsible borrower has endured, even though it’s wildly incorrect.
Fact: Carrying a balance doesn’t benefit your credit score at all; it just racks up unnecessary interest charges. Paying off your credit card in full each month is far better for your score and wallet. Keeping balances low or non-existent is a clear signal to lenders that you manage credit responsibly.
This myth haunts everyone who even considers peeking at their own credit score. They imagine that even a quick look would magically tank their score, leaving them ruined and filled with regret for their curiosity.
Fact: Checking your own credit does nothing to your score. It’s counted as a “soft pull,” which is completely different from a “hard pull” performed by lenders. Soft pulls are harmless, and monitoring your credit regularly is a great habit to catch errors or detect identity theft early.
Closing a credit card should be harmless, right? Many people think it’s just a matter of tidying up accounts they no longer use, with no impact on their credit score.
Fact: Closing a credit card can negatively affect your score in two ways. It reduces your overall available credit, increasing your utilization ratio. It can also shorten the average age of your credit accounts, a factor in your score. Sometimes, keeping old cards open can work in your favor.
It’s easy to see how this myth persists. After all, you’re using a card for payments, so surely it must contribute to your credit score, right?
Fact: Debit cards have no impact on your credit score. They’re tied to your bank account, not credit. To build credit, you need to use credit products like credit cards or loans. Debit cards don’t show lenders any of the borrowing and repayment behaviors that impact your score.
Paying all your bills on time feels like it should be the gold standard for credit improvement. If you’re keeping up with your rent and utilities, wouldn’t your score automatically soar?
Fact: While paying your bills on time is important, many of them don’t directly affect your credit score. Only accounts that get reported to credit bureaus, like loans and credit cards, help build credit. Non-reported bills might not help your score, but they sure hurt it if they go unpaid and land in collections!
Many people believe that getting married merges everything, including credit scores. The idea is that once you're hitched, your individual scores magically mix together to create one joint credit profile. This myth has caused couples to worry about their partner’s score being a drag on their finances.
Fact: Marriage doesn’t combine credit scores. Each person maintains their own credit history and score, no matter their relationship status. That said, applying for joint mortgages or credit can impact both parties’ credit histories since shared accounts appear on both reports. Your spouse’s habits don’t affect your individual score unless you share financial accounts.
Some believe the best way to avoid messing up their credit is never to engage with it. If you don’t use credit cards, take out loans, or dip into financial systems, you can’t damage your credit, right? It sounds foolproof, but it’s far from reality.
Fact: Avoiding credit entirely doesn’t protect you; it leaves you with no credit history. A lack of credit history can make future borrowing extremely difficult. Lenders view you as an unknown risk, which is no different from having a poor score. Building a good credit history slowly is much safer than avoiding it altogether.
Ever worry that your credit information could be accessed by just anyone? This myth suggests that anyone, from strangers to nosy neighbors, can pull up your credit history without consent, leaving you vulnerable.
Fact: Your credit score is protected by law. Lenders, landlords, or employers need a legitimate reason and often your authorization to access your credit report. Unauthorized sharing is illegal under federal regulations. While some institutions have legal access, monitoring your credit regularly ensures no unauthorized activity slips through the cracks.
The assumption here is that only major financial decisions, like buying a house or leasing a car, impact your credit score. Smaller, everyday transactions are irrelevant, or so the myth goes. It lulls people into a false sense of security about their financial habits.
Fact: Big purchases might draw attention, but smaller credit activities count too. Your credit score is influenced by payment history, credit utilization, length of credit, and more. Missing a credit card payment for a small purchase harms your score the same as a larger one. Every financial action tied to credit matters in the long run.
Some think co-signing a loan is harmless since it’s not their loan. They believe only the person benefiting from the loan is responsible, leaving their own credit untouched. It seems like a kind favor without personal risk.
Fact: Co-signing a loan makes you equally responsible for the debt. Any missed payments or defaults show up on your credit report too, potentially harming your score. Lenders treat co-signers as primary borrowers, so think carefully before signing. You’re not just offering moral support; you’re taking on financial responsibility if things go south.
Bankruptcy is often seen as a financial death sentence, with many believing it destroys your credit forever. The fear of everlasting consequences leads some people to avoid bankruptcy at all costs, even when it could reasonably help their situation.
Fact: While bankruptcy significantly affects your credit, it’s not permanent. Chapter 7 bankruptcy stays on your credit report for up to 10 years, while Chapter 13 lasts seven. However, you can start rebuilding your credit immediately. With responsible financial habits, it’s possible to repair your score over time and regain lenders’ trust.
Credit scores seem straightforward, leading many to think you only have one single number representing your financial trustworthiness. It’s a clean, simple idea... but it’s also incorrect.
Fact: You actually have multiple credit scores, depending on the bureau (Experian, TransUnion, or Equifax) and the scoring model (FICO or VantageScore). Lenders may look at different scores depending on their requirements. Each score reflects slightly different data, so they may vary. Monitoring multiple scores gives you a clearer picture of your overall credit health.
