The content is accurate at the time of publication and is subject to change.
When it comes to debt, credit reports and credit scores, conventional wisdom is usually spiced up with myths and misunderstanding. Here we've gathered some common credit score myths and revealed the truth behind them.
1. Checking your credit reports or score will hurt your credit score. Every time someone (including you) looks at your file, a notation called an "inquiry" goes on your credit report. This inquiry may or may not hurt your score. An inquiry affects your score only if it is related to a credit application. If you apply for a credit card or loan, your score might fall a bit. But if you simply look at your own credit report, you won't hurt your score.
2. Closing a credit card will help your score. If you have a credit card you do not use, don't close it without evaluating the consequences first. If you close it, you might lower your credit score. Credit scoring models measure risk by how much of available credit you are using, not by how much credit you have. That is called "credit utilization" and the higher it is, the worse it will be for your score. When you close your credit card, you will reduce your total available credit, which may result in higher credit utilization. (Still, in some cases, closing a credit card is worthwhile in the long run.)
3. Carrying a balance on your credit card will boost your score. Balances you have on your credit cards directly affect your credit utilization. The higher your credit card balance, the higher your utilization rate, which can hurt your credit score. Plus, it's a waste of money to pay interest on your balance if you can pay off the credit card balance in full each month.
4. Paying debts erases them. When you pay off your debt, you eliminate your obligation. However, the evidence of that debt can remain in your credit report for years. If you are a responsible creditor and pay your debts on time and in full, you will likely want your paid-off accounts to remain on your credit reports because they show your responsibility. On the other hand, if you've been chronically late or missed payments, that is a problem. Most negative information can remain on your credit reports for up to seven years (and up to 10 years with some bankruptcies) and negatively affect your score.
5. Higher income, better score. Your income has no direct impact on your credit score. Scores are based on the information contained in your credit reports, and they include information about your use of credit and your management of debt. There is no information about your income. Your income can affect your score indirectly, in terms of your ability to pay your debt.
6. Getting married means joint credit report. There is no such thing as a joint credit report. Whether you are married or single, you have your own credit report that is linked to your Social Security number.
7. There is a universal credit score. There are many different credit scores and credit scoring formulas. In addition, lenders and creditors may report data to all three nationwide credit bureaus - TransUnion®, Experian®, Equifax® - two or one, or none at all. That is another reason why your credit scores may be different.
8. You need an "expert" to dispute items on your credit report. There's nothing a "credit repair" company can do for you that you can't do yourself. Credit reestablishing services can help you come up with a plan to repay your debts, though.
9. Demographics are taken into account. Your credit reports do not provide much demographic information. You won't find any information about such things as race, national origin, religion, profession, disabilities, sexual orientation or military veteran status in your credit reports. And when it is not in your credit report, it can't affect your credit score.
