The definitive guide to debunking credit score myths

There are a lot of misconceptions about credit scores. Read on as experts explain how they really work


There’s an awful lot of misinformation about credit scores. We’ve decided to set things straight with the help of a number of experts who have helped compile this list of credit score myths – and debunked each one.

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There’s an air of mystery surrounding credit scores.

And an awful lot of misinformation.

But there doesn’t have to be.

We’ve decided to set things straight with the help of a number of experts who have helped compile this list of credit score myths – and debunked each one.

Keep reading to learn more about some common – and not so common – myths about credit scores that simply aren’t true.

1. Not having a credit card at all is good for your credit score

“The point of a credit history and score is so lenders can see what you’re like as a borrower,” Holly Andrews, managing director of KIS Finance, said.

If you have no history at all, there’s no evidence if you’re a good or bad borrower, so lenders will view you as a potential risk and may charge you higher interest rates on products until you can show that you’re a responsible borrower, she added.

2. Closing a credit card will improve your credit score

If you close a credit card with a high interest rate to boost your credit score, it won’t work, according to Igor Mitic, founder of the website Fortunly.

But if you have been paying off your card regularly, your credit score will improve just from that, he said.

“Therefore, removing a card that actually had a positive history can damage your credit score instead of improving it,” Mitic said.

Closing a credit card account can hurt your score by reducing your overall available credit, which counts for 30% of your score under FICO’s traditional formula. Conversely, keeping the card open and paying its balance in full each month can help your score.

See related: How to cancel a credit card

3. Credit scores take work history and assets into account

Morris Armstrong, founder and owner of tax preparation firm Morris Armstrong EA LLC, noted that credit scores are based on how much credit you have and your ability to pay it back – and that assets and work history simply aren’t a determinant in the scoring process.

A lender’s decision process may very well take into account assets and employment history, but that is a different matter.

“People need to understand that the score is just one factor in the granting of credit,” Armstrong explained.

4. Your score isn’t really important

Logan Allec, CPA and founder of Money Done Right, said he has dealt with clients who thought their scores weren’t important, which is wrong.

Several years ago, banks decided upon a strategy to get as many people as possible signed up for their credit cards, Allec said, and they lowered their credit standards so more people got accepted.

Although more recently, that has changed. According to a November 2019 report from the American Bankers Association, “the share of subprime accounts relative to total accounts fell to its lowest level in nearly four years.”

So, while it still might be somewhat easier than before to open a credit card with a low score, that same low score also makes the cost of your debt substantially more expensive because the lower your score, the higher interest rates you’ll likely pay.

5. Checking your credit score will ding it

Judith Corprew, head of the financial literacy program at Patriot Bank, N.A., said that only hard inquiries – those made by potential lenders assessing your credit – affect your score.

A hard inquiry happens when a creditor requests your credit score to help decide whether or not to approve you for a loan or credit card. A soft inquiry typically occurs when you check your score or a company is seeking background information on you and the inquiry is not related to giving you credit. Your current card issuers may also perform periodic soft inquiries as part of routine account reviews.

“Regularly checking your credit score is, on the contrary, a very important part of maintaining good financial literacy – it allows you to evaluate your current situation and make improvements,” Corprew said.

See related: Credit cards that offer free credit scores

6. You can increase your credit score by paying off collection accounts

Randall Yates is the founder and CEO of The Lenders Network, a loan comparison site specializing in helping people with credit issues.

“Unfortunately, as far as your score is concerned it doesn’t matter if it’s paid or unpaid – a collection account will hurt your score regardless of the balance,” Yates confirmed.

To increase your score you will have to get the collection account completely removed from your report, Yates noted.

“You can do this by asking the creditor if they will remove it if you agree to pay, or you can dispute the account with the credit bureau,” he said.

However, if the creditor does not agree to remove it and it’s not an error, the collection item will remain on your credit report for seven years.

In August 2014, FICO introduced its scoring model FICO Score 9, which disregards collection accounts you’ve paid off (whether you’ve paid in full or negotiated a settlement). But unlike its predecessor FICO 8, this model is not widely used by lenders.

7. Married couples share credit scores

Freddie Huynh, vice president of credit risk analytics at Freedom Financial Network, stressed that each person has their own credit report and credit score, which are based on the accounts in their own name (even if a married couple has the same last name).

“Every individual must obtain and review his or her own credit reports,” Huynh said.

See related: Getting married? Don’t say ‘I do’ to bad credit

8. You have only one credit score

The truth is, there are three credit bureaus – Equifax, Experian and TransUnion – and each calculates a slightly different credit score, said Jared Weitz, CEO and founder of United Capital Source.

Additionally, credit scoring firms such as FICO and VantageScore each have several scoring models, some of which are tailored to mortgage companies, auto lenders or other types of creditors.

So, the score you see may be different from the one a lender reviews for its underwriting purposes, he added.

“Your score will vary depending on the type of loan you are seeking, the scoring model and even when you run the calculation of the score,” Weitz said.

9. Every unpaid debt shows up in your score

Every debt can show up on your credit score, Chane Steiner, CEO of Crediful, said.

It’s up to the company you owe to decide whether or not to report it, he said, and you can call and ask a company whether or not it reports debt to the credit bureaus.

For example, while companies almost certainly report unpaid mortgage, student loan and credit card debt, they might not report unpaid accounts such as medical bills.

10. Employers are not allowed to check credit reports in the hiring process

They are allowed to, and frequently do, Allec said.

It’s particularly common for employers who hire those with access to large amounts of money or sensitive information (such as banks) and government agencies for which security clearances are required, he said.

“And some corporations look at credit reports to get an idea of a person’s financial responsibility,” Allec reported.

See related: Employer credit checks: Who does them, how they work and what laws apply

11. You have to earn a lot of money to have a good credit score

Holly Andrews explained that the amount of money you earn does not directly affect your credit score.

But your income directly affects your ability to make on-time credit card and loan payments, which is the most important credit scoring factor.

“So, as long as you borrow money responsibly and you don’t miss or make any payments late, your credit score will be in good shape no matter how much you’re earning,” Andrews said.

12. Everyone starts with a perfect credit score

“Man, do I wish this was true,” Jordanne Wells, founder of the website Wise Money Women, said.

However, your credit score is a reflection of your experience with credit – how long you’ve had it, your payment history, etc. – and good credit is built over time as you use it responsibly, Wells noted.

13. Having a bad credit score means you won’t be approved for anything

Although you might not qualify for the best products if you have a bad credit score, it doesn’t mean that you won’t be approved for anything, Holly Andrews said.

This is because your credit score isn’t the only thing that lenders take into account when deciding your creditworthiness – they may also consider your income and other debts, she explained.

“So, you will still be able to obtain credit, you may just have to pay a bigger deposit or higher interest rate,” Andrews said.

14. Anything above 600 is a good score

Sure, 600 sounds like a nice round number, but anything under 620 is generally considered poor, which means it’ll be hard to get credit, Wells said.

And if you get it at all, you’re going to get a higher interest rate for it, she noted.

“Generally, the goal is to have a score of at least 720, which FICO considers ‘very good,’ to get good rates,” Wells said.

See related: What is a good credit score?

15. You really need a credit monitoring service to find and fix errors

Credit monitoring services – many of which are owned by the credit bureaus themselves – can be helpful for people with ongoing problems with their credit reports, Allec of Money Done Right said.

“But the services don’t correct errors; they just notify the client if there is a suspected error or problem,” he disclosed.

Allec pointed out that consumers can get the same information by checking their credit reports at You can get one free report from each of the three major credit bureaus per year.

See related: Credit monitoring: When is it worth paying for?

16. Carrying a balance every month will improve your score

Wells said this myth is not only false but also dangerous and expensive. And it stems from the credit utilization factor of the credit scoring model.

Your credit utilization is simply the amount of credit you’re using divided by the total amount of credit you have available. Typically, it’s recommended you keep that number under 30%. But lower is better, and the best advice is to pay your balances in full each month.

See related: Forget the 30% credit utilization ‘rule’ – it’s a myth

17. It’s OK to be late in paying a bill once in a great while

Late payments hurt your credit score, period. According to FICO, a consumer with a credit score of 780 or higher can lose 90 to 110 points after a missing a payment.

“On-time payments still are the most important factor in developing good credit, constituting 35% of your score,” Steiner noted.

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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