Common Credit Score Myths Debunked

Credit scores play a significant role in our financial lives. They determine our eligibility for loans, credit cards, and even job opportunities. However, there are several myths surrounding credit scores that can lead us to make wrong decisions. In this article, we will debunk some of the most common credit score myths.

Myth #1: Checking your credit score will lower it
This is one of the most persistent myths surrounding credit scores. Many people believe that checking their credit score will lower it. However, this is not true. When you check your credit score, it is considered a “soft inquiry,” which does not affect your score. Only “hard inquiries” made by lenders when you apply for credit can affect your score.

Myth #2: Closing credit card accounts will improve your score
Some people believe that closing credit card accounts can improve their credit score. However, this is not always the case. Closing a credit card account can actually lower your score by reducing your available credit and increasing your credit utilization ratio. It is better to keep your credit card accounts open and use them responsibly.

Myth #3: You need to carry a balance to improve your score
Another common myth is that you need to carry a balance on your credit card to improve your credit score. This is not true. In fact, carrying a balance can actually hurt your score by increasing your credit utilization ratio. It is better to pay off your credit card balance in full every month to improve your score.

Myth #4: Your income affects your credit score
Many people believe that their income affects their credit score. However, this is not true. Your income is not a factor in calculating your credit score. Your credit score is based on your credit history, including your payment history, credit utilization, length of credit history, and types of credit.

Myth #5: Credit scores are all the same
There are several different credit scoring models used by lenders, and your score may vary depending on the model used. The most commonly used credit scoring model is the FICO score, which ranges from 300 to 850. However, there are also other models, such as VantageScore, that use a different scoring range.

In conclusion, understanding credit score myths can help you make informed decisions about your credit. Remember that checking your credit score, keeping your credit card accounts open, paying off your balances in full, and having a good credit history are some of the most important factors in improving your credit score.