10 Common <br>Credit Score Myths


10 Common
Credit Score Myths

October 11, 2021
Certified Credit

In our modern financial system, having a high credit score opens many doors. It can help you qualify for lower interest rates, larger loans, cheaper insurance, apartments, and even certain jobs.

Despite the societal significance of a credit score, its role in financial wellness is rarely taught in school. In turn, many credit misconceptions have been able to spread, confusing credit users and setting them up for unintended credit mistakes.

If you want to manage your credit properly and maintain a high credit score, you need to be able to separate these credit myths from credit facts. Below, we’ll help you do just that.

10 Common Credit Score Misconceptions

Let’s dismantle the following ten credit score myths:

Myth #1: Checking Your Credit Score Lowers It

Do you avoid checking your credit score because you’re afraid it will go down if you do? If so, you’re not alone. Roughly 15% of of respondents in a U.S. News & World Report survey believe this credit myth.

This misconception stems from the fact that hard inquiries can cause your credit score to drop by a few points temporarily. Hard inquiries occur when your lender pulls your credit score during a formal loan or credit card application. Checking your own credit score only causes a soft inquiry into your credit report. Soft inquiries don’t have any impact on your credit score.

Checking your credit score regularly is an important part of responsible credit management. When you’re aware of your current credit score, you can make better credit decisions and dispute any errors that show up on your credit report right away.

Myth #2: Your Education, Employment, Income, or Savings Impacts Your Credit Score

Several credit myths revolve around which factors impact your credit score. Nearly 60% of survey respondents believed that their employment history impacted their credit score. Over 50% said the same about their savings accounts.

Contrary to popular belief, the only factors that impact your credit score are your:

  • Payment history — Your payment history shows how well you’ve made your credit payments on time in the past. Making on-time credit payments consistently helps you earn a high credit score.
  • Amounts owed (a.k.a. credit utilization ratio) — Your credit utilization ratio measures how much credit you’re currently using (the amount of debt you currently owe) compared to your total credit limit (how much credit you have access to). If you want to have a high credit score, it’s helpful to keep your credit utilization ratio below 30%.
  • Length of credit history — Your length of credit history is how long you’ve been using credit, based on the average age of your open credit accounts. The longer your credit history, the better.
  • Credit mix — Your credit mix shows how many different types of credit accounts you have open. A diverse credit mix is good for your credit score.
  • New credit accounts — New credit accounts are any credit accounts you’ve opened recently. Applying for new credit accounts can temporarily reduce your credit score since they result in hard inquiries into your credit report.

As you can see, none of these factors involve your education, employment history, income, savings, or demographics. They’re strictly based on your credit activity.

In turn, you could be a CEO with millions of dollars in the bank and have a low credit score. You could also work a minimum wage job and have minimal savings yet manage to maintain a high credit score.

Myth #3: Paying Off a Loan Improves Your Credit Score

Making your final loan payment is a satisfying experience and a big accomplishment. You may assume this achievement will be rewarded by a credit score boost. To many credit users’ surprise, this isn’t the case.

Paying off a loan can actually reduce your credit score. That’s because paying off a loan:

  • Removes its age from your average length of credit history — Once you pay off a loan, its credit account will be closed. Only open credit accounts contribute to your length of credit history.
  • Diminishes your credit mix — Likewise, once your loan is paid off, it will no longer contribute to the diversity of your credit mix.

Both factors have negative credit score consequences. This isn’t to say that you should avoid paying off your loans — paying them off on time is an essential part of being a responsible borrower. Just don’t expect to see an increase in your credit score after paying them off.

Myth #4: Paying Off Your Credit Card Balance Each Month Harms Your Credit Score

Another widespread credit myth is that you should carry a balance on your credit cards month-to-month. In reality, you don’t need to carry a balance to reap the rewards of an open credit card account.

In contrast, paying off your credit card balance each month is a great habit to get into. It can help you:

  • Save money on interest
  • Ensure that you make your minimum credit card payments on time each month
  • Maintain a lower credit utilization ratio

If you pay off your credit card balance each month consistently, your lender may even reward you with a credit limit increase, which can further improve your credit utilization ratio.

Myth #5: Closing a Credit Card Account Increases Your Credit Score

While paying off your credit card balance won’t hurt your credit score, closing a credit card account can. Only 23% of survey respondents were aware of this fact. The others believed that closing a credit card account would improve their credit score.

Just like paying off a loan, closing a credit card account reduces your length of credit history and diminishes your credit mix. It also lowers your overall credit limit, resulting in an increase in your credit utilization ratio.

For these reasons, keeping old credit card accounts open is better for your credit score, even if you don’t use them anymore.

Myth #6: You and Your Spouse Share a Credit Score

After tying the knot, you and your spouse may decide to combine your finances. However, your credit scores will always remain separate. There’s no such thing as a joint credit score.

While your credit scores will remain separate, they can still be impacted by each other’s actions. That’s because your joint credit accounts’ activity will be reported under both of your credit reports. As a result, your spouse’s poor credit management skills could harm your credit score if you don’t step in and make sure your joint credit accounts are paid on time.

Myth #7: Getting Divorced Can Release You from Joint Debt Obligations

Along the same lines, it’s important to note that getting divorced won’t release either of you from your joint debt obligations.

A judge may declare that only one of you is responsible for making payments on a shared mortgage, car loan, or credit card. However, the judge’s divorce decree doesn’t override the contract you have with your lenders.

To protect your credit score post-divorce, you should remove your name from any joint credit accounts that you won’t be managing. Otherwise, your ex’s missed payments could hurt your credit score long after your divorce is finalized.

Myth #8: Bankruptcy Gives Your Credit Score a Fresh Start

If you have an overwhelming amount of debt, you may consider filing for bankruptcy. This legal process can relieve you of your debt obligations, either partially or completely.

While bankruptcy can wipe away your debts, it won’t clean up your credit score. In contrast, bankruptcy can drag down your credit score for up to a decade.

Myth #9: Having a Low Credit Score Means You’ll Never Get Approved for Financing

Most lenders use your credit score to determine if you qualify for financing, but it’s not the only factor they consider. They may also look at your debt-to-income ratio, assets, and savings.

If the rest of your application is strong, you may still get approved for financing with bad credit.

Just keep in mind that the financing you receive with a low credit score may come with:

  • Higher interest rates
  • Smaller borrowing limits
  • Shorter repayment periods
  • Requirement of collateral

Myth #10: Generating an Initial Credit Score is Hard If You Don’t Have Any Credit History

Lastly, many people believe the myth that it’s hard to earn a credit score from scratch. It’s not as hard as you might think.

While you may not qualify for some credit cards and loans without a credit score, there are other credit-building tools at your disposal, such as:

  • Applying for a secured credit card, student credit card, or store credit card
  • Taking out a credit-builder loan
  • Becoming an authorized user on someone else’s credit account
  • Reporting your rent and utility payments to the credit bureaus

Most of these credit-building strategies don’t require any credit history. By using them responsibly, you can earn a high credit score in due time. It usually takes six months of reported credit activity to generate a credit score.

Certified Credit: Empower Yourself with Credit Facts

Now that we’ve dismantled these common credit score myths, you can feel more empowered in your credit decisions and do what it takes to maintain a high credit score long-term.

For more credit-related tips, check out Certified Credit’s blog. As a leading mortgage credit report provider, we share helpful information about credit scores, credit reports, mortgage fraud, mortgage lender customer retention, and much more.


U.S. News. Survey: Almost One-Third Aren’t Sure What Hurts or Helps Your Credit Score.

Consumer Financial Protection Bureau. What’s a credit inquiry?

Visa Inc. Survey: Credit Score Myths Run Rampant.

Experian. What Affects Your Credit Scores?