Fact or Fallacy? 5 Credit Score Myths Debunked

The world is full of myths and common misconceptions, and plenty of them surround something everyone has: a credit score. Whether you’re new at building credit or you have a longer credit history, it’s time to learn fact from myth. Check out these 5 common credit score myths.

Fallacy: If I check my credit my score will drop

Fact: If you check your own credit score it will not have any damage on your score. This misconception exists because most people don’t know the difference between a “soft” pull and a “hard” credit pull. A soft pull means it will only be shown on a personal credit report. Only hard credit pulls, ones made from a lender or creditor, can affect your score, but only by a few points.

Fallacy: A poor score will be with me forever

Fact: Your credit score will always be a snapshot of your credit risk at a particular point in time and it’s constantly changing. Your score will adapt as you change the way you handle credit, so past credit problems will have less of an impact as time elapses. The better you get at using credit, the better your score will be.

Fallacy: Closing out your old credit cards will improve your credit score

Fact: One of the factors to determine your credit score is your debt utilization ratio, meaning how much credit you have available and how much you use at a given time. If you close a credit card it means the amount of credit you have available decreases which means when you use your card, the ratio of utilization to available credit increases. As long as you only spend 30% of your credit limit, you can close the card and re-adjust the amount you spend to remain in the 30% utilization rate.

Fallacy: All credit scores are the same  

Fact: A credit score, also known as a FICO score, is reported by the three major credit bureaus. Since they’re all separate companies they update their records at different speeds. You’ll want to check with all three to get an accurate representation of your score and don’t be surprised to see different scores.

Fallacy: My score will drop if I apply for new credit

Fact: When you apply for new credit you’re conducting a “hard inquiry” which will cause a small, yet temporary dip, in your credit score. Applying for new credit can help you in the long run, but it can cause damage when you apply for many new lines of credit in a short period of time.

Thinking is different than knowing

Perhaps the biggest myth of all is believing you have good credit just because you pay your bills on time. Thinking is different than knowing and you should check your credit annually to make sure you know what your score is. Lastly, there are a lot of credit score myths out there so don’t believe everything you hear.

What credit score myths have you heard?