12 Credit Score Myths That Are Costing You Money

Myth 1: Checking your credit score hurts it

This is the most widespread credit score myth and it stops millions of people from monitoring their own credit. There are two types of credit inquiries: soft inquiries and hard inquiries. Checking your own score, receiving pre-approval offers, and employer background checks all generate soft inquiries. Soft inquiries are visible only to you and have zero effect on your credit score. Other creditors cannot see them.

Hard inquiries occur when you apply for credit and a lender pulls your report to make a lending decision. A hard inquiry typically reduces your score by 5 to 10 points and remains on your report for 2 years, though FICO only factors it into your score for 12 months. FICO also deduplicates multiple hard inquiries for the same loan type — mortgage, auto, or student loan shopping — within a 14 to 45 day window depending on the FICO version, counting them as a single inquiry.

Myth 2: You need to carry a balance to build credit

This myth costs consumers billions in unnecessary interest payments every year. You do not need to carry a balance from month to month to build credit. What builds credit is having an account that reports to the bureaus with on-time payments. FICO scores your credit utilization based on the balance reported on your statement closing date, not whether you carried it forward.

Paying your credit card in full every month is the optimal strategy. It builds payment history (35% of your FICO score) while keeping utilization low and costing you zero interest. The highest-scoring consumers typically show 1 to 3 percent utilization at statement close. Carrying a balance only adds interest charges — it does not add points.

Myth 3: Closing old credit cards improves your score

Closing a credit card can hurt your score in two ways. First, it removes that card's credit limit from your total available credit, which increases your overall utilization ratio. If you have $10,000 in total limits and close a card with a $3,000 limit, your available credit drops to $7,000. Any existing balances now represent a higher percentage of your available credit.

Second, closed accounts eventually fall off your credit report. Under current bureau practices, closed accounts with positive history remain on your report for up to 10 years. Once removed, that account's age no longer contributes to your average age of accounts or length of credit history, which is 15% of your FICO score. Keeping old cards open and using them occasionally for a small recurring charge is more beneficial than closing them.

Myth 4: Your income affects your credit score

Your income does not appear anywhere in a FICO or VantageScore calculation. Credit scores are computed entirely from the data in your credit file at the bureaus, and income is not part of that data. The Metro 2 format that furnishers use to report account data to the bureaus does not include an income field. Employment information can appear on a credit report if a lender reported it during an application, but it is not used in score calculations.

A person earning $30,000 per year with perfect payment history, low utilization, and diverse accounts will have a higher credit score than a person earning $300,000 with late payments and maxed-out cards. Lenders may consider income separately when deciding whether to approve a loan, but that is a lending decision — not a credit score input.

Myth 5: Paying off collections fixes your credit score

Whether paying a collection account improves your score depends entirely on which scoring model your lender uses. Under FICO 8, which is still the most widely used version by lenders, a collection account remains a negative mark whether it is paid or unpaid. The presence of the collection on your file is what damages your score, not the outstanding balance. Paying a collection under FICO 8 changes the status from unpaid to paid but does not remove the negative scoring impact.

FICO 9 and VantageScore 3.0 and later versions treat paid collections differently — they exclude paid collections from scoring entirely. If your lender uses one of these newer models, paying the collection will improve your score. However, most mortgage lenders still use older FICO versions (FICO 2, 4, and 5), which treat collections similar to FICO 8.

Myth 6: Credit repair companies can remove accurate information

Under FCRA Section 611 (15 U.S.C. 1681i), credit bureaus must investigate disputed information and remove items that are inaccurate, incomplete, or unverifiable within 30 days. However, there is no legal mechanism to remove information that is accurate and verifiable. If you were 60 days late on a payment and the furnisher has records confirming it, disputing it will not result in removal.

Companies that promise to "wipe your credit clean" or "remove all negative items" are either misleading you or engaging in illegal practices. One common scheme is a "credit sweep," where a company files false identity theft reports (FTC Form 14039) claiming that all negative items are the result of fraud. Filing a false identity theft report is a federal crime under 18 U.S.C. 1028. The Federal Trade Commission has shut down multiple operations using this tactic.

Myth 7: You only have one credit score

At any given time, you have dozens of credit scores. FICO alone offers more than 28 scoring models, including industry-specific versions for auto lending (FICO Auto Score 8), credit cards (FICO Bankcard Score 8), and mortgages (FICO Score 2, 4, and 5). VantageScore has released 4 major versions. Each scoring model weighs the same data differently, producing different numbers from the same credit file.

On top of model differences, each of the three credit bureaus may have slightly different data. One bureau might have a trade line that another does not. One might have received a late payment update that another has not processed yet. The combination of different scoring models applied to different bureau data creates a wide range of scores for the same consumer at the same point in time.

Myth 8: Debit cards build credit

Debit cards are not credit products. They withdraw money directly from your bank account. Banks do not report debit card usage to the credit bureaus because there is no credit being extended, no repayment to track, and no Metro 2 record to generate. Using a debit card for 20 years will not produce a single entry on your credit report.

Myth 9: Being denied for credit hurts your score

Credit denials are not reported to the credit bureaus. The bureaus have no way of knowing whether an application was approved or denied. What does affect your score is the hard inquiry that was generated when you applied. That inquiry reduces your score by approximately 5 to 10 points regardless of the outcome — approved or denied, the inquiry impact is the same.

Myth 10: Married couples share a credit score

There is no such thing as a joint credit score. Each person maintains their own individual credit file at each bureau, and each file produces its own score. Marriage does not merge credit files. Changing your last name does not create a new file — the bureau links your new name to your existing file using your Social Security Number.

Joint accounts and authorized user accounts do appear on both spouses' credit reports. If you open a joint credit card, both account holders' files will show that account's payment history and balance. This means one spouse's missed payment on a joint account can affect both scores. Individual accounts remain on only the account holder's report.

Myth 11: Paying off a loan early always helps your score

Paying off an installment loan is financially smart because it eliminates interest payments. However, it can temporarily lower your credit score. When you pay off a loan, it changes from an active account to a closed account. This can reduce your credit mix (10% of FICO), remove an active source of payment history, and decrease the number of open accounts on your file.

The score impact is typically small — 5 to 20 points — and temporary. The closed loan remains on your report with its full positive payment history for up to 10 years. The financial benefit of eliminating interest almost always outweighs the minor score impact. Do not keep paying interest on a loan solely to maintain a credit score.

Myth 12: Credit Privacy Numbers are legal alternatives to Social Security Numbers

Credit Privacy Numbers (CPNs) are not legal. Using a CPN to apply for credit constitutes federal identity fraud under 18 U.S.C. 1028 (fraud and related activity in connection with identification documents). CPNs are typically Social Security Numbers stolen from deceased individuals, children, elderly people in care facilities, or incarcerated individuals. The person selling the CPN is committing a crime, and the person using it to apply for credit is committing a separate crime.

The Federal Trade Commission has prosecuted numerous CPN sellers and has been clear that there is no legitimate alternative to a Social Security Number for credit purposes. Companies marketing CPNs as "legal" are either misinformed or deliberately misleading consumers. If caught using a CPN, you face federal fraud charges, and any credit built under that number will be unwound.

Key takeaways

For more on how credit scores are calculated, read our guides on payment history and credit utilization. To understand the difference between free scores and lender scores, see FICO vs VantageScore. To learn what you can do when information on your report is wrong, read your rights under the FCRA. For the full picture of what data furnishers report, see how credit reporting actually works.