10 Credit Score Myths That Are Costing You Money

Your credit score is one of the most important three-digit numbers in your life. It determines whether you get approved for a mortgage, what interest rate you pay on your car loan, and even whether a landlord will rent to you. A good credit score can save you tens of thousands of dollars over your lifetime. A bad one can cost you just as much.

Yet despite how consequential your credit score is, most people have only a vague understanding of how it works. They rely on advice from friends, family, and the internet. Unfortunately, much of this advice is wrong, and acting on it can seriously damage your financial future.

We've identified the 10 most pervasive credit score myths and explain exactly why each one is false. Understanding the truth behind these myths is the first step toward building the strong credit profile you deserve. If you want to dive deeper into how your score is actually calculated, read our comprehensive guide on how FICO scores work.

Myth 1: Checking Your Credit Score Lowers It

This is perhaps the most common and damaging credit score myth in existence. Millions of people avoid checking their credit scores because they fear it will hurt them. This avoidance is dangerous, because not monitoring your credit means you might miss signs of identity theft, errors on your report, or opportunities to improve your score before applying for a major loan.

Here is the truth: checking your own credit score is classified as a soft inquiry (or soft pull), and soft inquiries have absolutely zero impact on your credit score. You can check your score as often as you like without any penalty.

What actually does affect your score is a hard inquiry (hard pull), which occurs when a lender checks your credit because you applied for a new loan or credit card. Hard inquiries may lower your score by a few points and remain on your report for two years, though their impact diminishes over time.

The distinction is straightforward: soft inquiries are initiated by you or by companies making pre-approved offers. Hard inquiries are initiated by lenders when you apply for credit. Many banks and credit card companies now offer free credit score monitoring, so you can check your score regularly with no consequences whatsoever.

If you want to understand exactly what goes on your credit report and how different inquiries appear, our guide on how to read your credit report breaks it all down in plain English.

Myth 2: You Should Carry a Balance to Build Credit

This myth costs consumers billions of dollars in unnecessary interest charges every year. The belief that you must pay interest on your credit card to build credit is completely false, and it is one of the most expensive myths on this list.

Credit scoring models, including FICO and VantageScore, do not care whether you pay interest. They care about your payment history and credit utilization. Your credit card issuer reports your statement balance to the credit bureaus each month. Whether you pay that balance in full or carry it over and pay interest makes no difference to your credit score whatsoever.

The optimal strategy is simple: use your credit card for regular purchases and pay the statement balance in full every month before the due date. This demonstrates responsible credit behavior, avoids interest charges entirely, and builds your credit score just as effectively as carrying a balance. In fact, carrying a balance can hurt you if it pushes your credit utilization ratio above the recommended 30 percent threshold.

Consider this example. If you have a card with a $5,000 limit and you charge $1,000 in a month, carrying that balance and paying, say, 24% APR interest costs you $20 per month in interest. Your credit score does not improve one bit compared to paying the $1,000 in full. Over a year, that myth costs you $240 for absolutely no credit-building benefit.

Myth 3: Closing Old Credit Cards Helps Your Score

This is another extremely common misconception, and it can cause significant damage to your credit score. Closing an old credit card account typically hurts your score for two important reasons.

First, it increases your credit utilization ratio. This ratio measures how much of your available credit you are using, and it accounts for about 30 percent of your FICO score. When you close a credit card, you remove its credit limit from your total available credit. If that card had a $10,000 limit and you close it, your total available credit drops by $10,000. Even if your balances stay the same, your utilization percentage goes up, which can lower your score.

Second, closing old accounts can eventually shorten your average age of accounts, which makes up about 15 percent of your FICO score. While closed accounts in good standing may remain on your report for up to 10 years and continue to age during that period, once they fall off your report, your average account age drops. If the card you closed was your oldest account, the impact can be especially pronounced.

The better approach is to keep old credit cards open and active, even if you only use them for a small recurring charge like a streaming subscription. This maintains your total available credit, keeps your utilization low, and preserves your credit history length. If a card has an annual fee that you no longer want to pay, call the issuer first and ask about no-fee card options before closing the account entirely.

Myth 4: You Have Only One Credit Score

This myth persists because many free credit monitoring services display a single score, leading people to believe that this is the only score that matters. The reality is far more complex.

You actually have dozens of credit scores, and they can all differ. Here is why. First, there are three major credit bureaus in the United States: Equifax, Experian, and TransUnion. Each bureau maintains its own separate credit file on you, and the information in each file may differ slightly. Some creditors report to all three bureaus, while others report to only one or two. This means your credit report content can vary across bureaus.

Second, there are multiple scoring models. FICO and VantageScore are the two major scoring model families, and each has multiple versions. FICO alone has FICO Score 8, FICO Score 9, FICO Score 10, and industry-specific versions like FICO Auto Score and FICO Bankcard Score. A lender might use FICO Score 8 from Experian, while another lender uses FICO Score 9 from TransUnion for the same applicant.

Additionally, the scores you see on free monitoring services are often educational scores or VantageScore variants, not the actual FICO scores that most mortgage lenders use. This is why your free score might be 720 while a mortgage lender sees 695. Both scores are real, they are just calculated differently.

What matters most is the score your specific lender uses. For mortgages, it is typically the middle FICO score from all three bureaus. For credit cards, it is often FICO Score 8 or 9. Understanding this helps you interpret discrepancies between different score sources without panicking.

Myth 5: Your Income Affects Your Credit Score

Many people are surprised to learn that their income is not a factor in their credit score calculation at all. Your salary, bonuses, investment income, and overall wealth have zero direct impact on your credit score.

FICO scores are calculated using only the information found in your credit report, which includes your payment history, amounts owed, length of credit history, new credit, and credit mix. Your income is not reported to credit bureaus and does not appear on your credit report, so it cannot influence your score.

That said, income can have an indirect effect. A higher income might make it easier to pay your bills on time, reduce your credit card balances, and qualify for credit limit increases, all of which can improve your score. But the income itself is not part of the formula.

Conversely, this means that a high income does not guarantee a good credit score. You can earn $200,000 per year and still have a poor credit score if you miss payments and max out your credit cards. Meanwhile, someone earning $30,000 who pays all their bills on time and keeps balances low can have an excellent score.

This is also important to understand during loan applications. While lenders do consider your income when deciding whether to approve you and how much to lend, the credit score they pull is completely independent of what you earn. If you have been relying on a high income and neglecting your credit habits, you may be in for a rude surprise when applying for a mortgage.

Myth 6: Using a Debit Card Builds Credit

This myth is understandable but fundamentally wrong. A debit card draws money directly from your checking account. It is not a form of credit, and therefore, no information about your debit card usage is reported to any of the three major credit bureaus.

Credit scores measure how responsibly you handle borrowed money. Since a debit card does not involve borrowing, it cannot demonstrate creditworthiness to scoring models. You could use your debit card every single day for years, and your credit score would remain unaffected, because the scoring models never see that activity.

This is an important distinction for people who are trying to build credit from scratch or rebuild after financial difficulties. If you have been using only a debit card and wondering why your credit file is thin, this is the reason. To build credit, you need credit products that report to the bureaus, such as credit cards, installment loans, or secured credit cards.

If you are concerned about falling into debt with a credit card, a secured credit card can be a great middle ground. You put down a refundable deposit as your credit limit, use it like a regular credit card, and the issuer reports your payment history to the credit bureaus. This way, you build credit without risking spending more than you can afford.

Myth 7: All Debt Is Bad for Your Credit Score

This is one of the more nuanced myths on our list. While it is true that carrying high balances relative to your credit limits can hurt your score, having some debt can actually be beneficial for your credit profile. The key is the type and amount of debt.

Credit scoring models reward credit mix, which accounts for about 10 percent of your FICO score. Having a healthy mix of different types of credit, such as revolving credit (credit cards) and installment loans (mortgages, auto loans, student loans), shows lenders that you can manage various types of credit responsibly.

A person with a mortgage, an auto loan, and one credit card, all paid on time, will typically have a higher credit score than someone with no debt at all and therefore no credit history. Having no debt means you have no track record for lenders to evaluate, which can result in a thin file or no score at all.

The distinction to make is between manageable debt and excessive debt. A mortgage payment that is well within your budget and paid consistently every month is excellent for your credit. Maxed-out credit cards with minimum-only payments are terrible for your score. The same is true for student loans or auto loans: as long as you make your payments on time, these installment accounts contribute positively to your credit history.

The goal is not to have zero debt. The goal is to have the right kind of debt, managed responsibly. Pay everything on time, keep revolving balances low, and maintain a mix of credit types over time.

Myth 8: Paying Off a Debt Removes It from Your Credit Report

This myth can lead to major disappointment when people pay off old debts expecting their credit reports to be wiped clean, only to find the accounts still listed. While paying off a debt is always a responsible financial move, it does not erase the account history from your credit report.

When you pay off an account, the status updates to "paid" or "closed," but the history remains. For accounts in good standing, this is actually a positive thing. A credit card you paid off after 10 years of on-time payments shows a decade of responsible behavior, which is excellent for your credit score. Those positive payment histories remain on your report and continue to help your score.

For accounts with negative history, such as collections or charge-offs, paying them off updates the balance to zero but does not remove the record of late payments or the collection itself. These negative items remain on your report for up to seven years from the date of the first delinquency, regardless of whether you pay them. The good news is that the impact of negative items decreases over time, so a paid collection hurts your score less than an unpaid one, especially as it ages.

If you discover inaccurate negative items on your credit report, you have the right to dispute them. Our free debt validation letter generator can help you formally challenge errors and potentially get inaccurate items removed from your report.

Myth 9: Marriage Automatically Merges Your Credit Scores

Marriage changes many things, but your credit score is not one of them. Credit reports and scores are tied to individual Social Security numbers, and they do not merge when you get married. Each spouse maintains their own separate credit history, credit reports, and credit scores throughout the marriage.

That said, your financial decisions as a married couple can indirectly affect each other's scores. If you open a joint credit card or become an authorized user on your spouse's account, that account appears on both of your credit reports. Your spouse's payment behavior on that shared account then affects your score, and vice versa.

If your spouse has excellent credit and adds you as an authorized user on an old, well-managed credit card, you may see a boost to your score because you inherit some of that positive history. Conversely, if your spouse misses payments on a joint account or maxes out a shared credit card, your score will suffer too.

It is important for couples to discuss their credit situations openly before making joint financial decisions. If one spouse has a significantly lower credit score, it may make sense to keep certain accounts separate initially and work together to improve the lower score before applying for a mortgage or other major joint credit.

Myth 10: Credit Repair Companies Can Remove Accurate Negative Information

This myth is not just wrong; it has led to countless scams and legal action against fraudulent credit repair companies. No company, no matter how much you pay them, can legally remove accurate, verifiable negative information from your credit report before the legally mandated time period expires.

Under the Fair Credit Reporting Act (FCRA), negative items such as late payments, collections, charge-offs, and most bankruptcies must remain on your credit report for a specific period, typically seven years for most negative items and up to ten years for Chapter 7 bankruptcies. During this time, the credit bureaus are legally required to maintain accurate information.

What credit repair companies can legitimately do is help you identify and dispute inaccurate or unverifiable items on your report. If a collection agency cannot verify a debt within the required timeframe, the credit bureau must remove it. Some disreputable companies exploit this process by filing frivolous disputes on accurate information, hoping the creditor fails to respond in time. This is a temporary fix at best and can backfire if the creditor re-verifies the information.

The better approach is to dispute errors yourself for free, which you can do by sending a debt validation letter to the collection agency. Our free debt validation letter tool generates a professional letter you can send to challenge questionable items on your credit report, without paying a credit repair company hundreds or thousands of dollars.

For accurate negative items, the best strategy is patience combined with positive behavior. As negative items age, their impact on your score diminishes. Meanwhile, building positive history through on-time payments, low utilization, and a diverse credit mix gradually overwhelms the negative marks. In most cases, a few years of good financial behavior can restore your credit to a strong position, even with some negative items on your report.

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