10 Credit Score Myths And Revelation To Avoid Losing Money

By Lyle D. Solomon

January 10, 2024   •   Fact checked by Dumb Little Man

credit score myths and truths

Your credit score matters. It influences every aspect of your financial life. It will be hard to convince your creditors that you will be able to pay off your debts with a low credit score. Even to rent an apartment or land a good job, you need to have a good credit score. It is a crucial part of your financial well-being. But, many myths have developed surrounding credit scores that may leave you feeling overwhelmed. Some of these myths can even hurt your credit health.

By debunking these common myths, you can learn the right way to build strong credit.

Myth 1: Closing credit accounts will improve your score.

Fact: The truth is just the opposite. Financial experts don’t recommend closing old accounts. This erases your payment history and brings down your credit limits. Your credit use ratio is likely to go up as a result. This typically causes credit scores to see a steady fall. Some circumstances may require you to cancel a credit card, so make sure you understand each specific situation.

Myth 2: Your credit score will instantly rise after paying off debts.

Fact: The FICO score is calculated based on your payment history, amount owed, length of credit history, new credit, and types of credit used. It is a combination of these factors, not your payments alone. The payment history influences your credit score but cannot instantly improve it once you pay off the debt.

It takes considerable time to see improvement. Paying off high-interest debt will help your overall financial health. But, the act of paying off installment loans, a mortgage, or a student loan will not significantly improve your credit score.

Myth 3: All of your credit scores are alike.

Fact: The three main credit bureaus (Experian, Equifax, and TransUnion) calculate credit scores in a variety of ways. So, the results after calculation are going to vary. Depending on which bureau the creditor pulls their report from, that will determine what information they receive. Each bureau had its own updating procedures, and not all financial institutions report to all credit bureaus. So, your FICO score may differ.

Myth 4: Checking your credit report hurts your credit score.

Fact: Checking your credit report does not negatively affect your credit score. In fact, it is crucial to review and monitor your credit the right way.

When you check your credit report, it is considered a “soft credit inquiry,” which doesn’t affect your score. But, applying for a credit card or a loan triggers a “hard credit inquiry,” which temporarily drops your credit score. Lenders report hard credit inquiries to the three credit bureaus (Experian, Equifax, and TransUnion).

Myth 5: Every person has a credit score.

Fact: This idea is actually wrong. Many people live with no or low credit. According to the Consumer Financial Protection Bureau report, 1 in 10 people in the US have no credit score. The report also showed that 46% of people who live in low-income areas don’t have credit scores.

Myth 6: Paying bills in cash helps to improve your credit score.

credit scores myths and truths

Fact: Using cash to pay bills is simply a method of paying bills. It doesn’t help to boost your credit score because there is nothing to report to the three credit bureaus. But, using a credit card for paying bills creates a line of credit history. This method of payment will help to boost your credit score.

Myth 7: Raise your income to improve your credit score.

Fact: Income is not a factor when determining your credit score. Your income is a vital factor when determining your ability to pay bills. But since it is not reported to the credit bureaus, it is not factored into your credit. Only payment history, amount owed, the length of credit history, and how often you apply for new credit affect your score.

Myth 8: To build credit, you have to be in debt.

Fact: This is a common misconception. When you pay your credit card bills on time and in full, you enjoy interest-free payments. You do not have to worry about carrying debts every month. Plus, on-time payments help to build a positive credit history and bring up your FICO score.

Myth 9: Keep fewer credit cards to boost your credit score.

credit score myths truths

Fact: The credit scoring system depends on how you use your available credit. It doesn’t matter how many credit cards you keep in your wallet, but it judges how wisely you are using them.

Myth 10: Paying debt in collection improves your score instantly.

Fact: Late payments or missed payments appear on your credit report. The accounts may go to collections. This negative information hurts your credit score and stays in your history for seven years. Even after you pay the debt in collection, the information will still be visible on your account. To avoid any problems, make sure you keep up with on time payments to avoid collection accounts on your credit report.


Your credit score is your financial scorecard. Some credit score myths can be risky for your financial health, so don’t believe them without getting the facts. Don’t assume that credit is an evil to be avoided at all costs. Instead of fearing your credit, try to lengthen your credit history. Manage your credit cards and monthly payments strategically. Achieving a good credit score is worth the effort. It will provide you with financial security and ease your financial journey.

Lyle D. Solomon

Lyle David Solomon is a licensed attorney in California. He has been affiliated with the law firms in California, Nevada, and Arizona since 1991. As the principal attorney of Oak View Law Group , he gives advice and writes articles to help people solve their debt problems.

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