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Credit Score Myths That Are Costing You Thousands

Don't let these common misconceptions about credit scores hold you back from financial freedom and better rates on loans and cards.

By Maya Singh

September 14, 2026 7 min read

In the vast, often confusing world of personal finance, few things loom as large and mysterious as your credit score. It’s a three-digit number that can dictate everything from whether you get approved for a mortgage to the interest rate on your next car loan. Yet, despite its undeniable importance, a surprising number of people hold onto deeply ingrained credit score myths that are not only untrue but actively harmful to their financial well-being. Think of it like this: you wouldn't drive a car without knowing how to put gas in it, so why navigate your financial life based on outdated or incorrect assumptions about something so critical? Let's dismantle these pervasive myths and set the record straight, potentially saving you thousands of dollars in the process.

Myth 1: Checking Your Credit Score Lowers It

This is perhaps one of the most persistent and damaging credit score myths out there, leading many people to avoid checking their credit report or score regularly. The truth is, there are two types of credit inquiries: soft inquiries and hard inquiries.

A soft inquiry occurs when you check your own credit score or when a potential lender pre-screens you for an offer. These inquiries have absolutely no impact on your credit score. In fact, checking your score regularly through services like those offered by many banks or credit card companies is a smart move. It helps you stay informed and can alert you to potential errors or fraudulent activity on your report.

A hard inquiry, on the other hand, occurs when you apply for new credit, such as a credit card, a mortgage, or an auto loan. These do have a minor, temporary impact on your score, typically dropping it by a few points for a short period. The key here is 'temporary' and 'minor.' A single hard inquiry is rarely a deal-breaker, but multiple hard inquiries within a short timeframe can signal to lenders that you're in financial distress or taking on too much new debt, which can be a red flag. However, if you’re rate shopping for a mortgage or car loan, multiple inquiries within a specific window (usually 14-45 days, depending on the scoring model) are often counted as a single inquiry, recognizing that you’re looking for the best rate, not just new credit.

Myth 2: Carrying a Balance on Your Credit Card Helps Your Score

This myth suggests that if you pay off your credit card bill in full each month, you're not proving your creditworthiness, and therefore, carrying a small balance over will somehow boost your score. This is completely false and can be an expensive mistake.

Credit scoring models like FICO and VantageScore primarily look at your credit utilization ratio, which is the amount of credit you're using compared to your total available credit. A lower utilization ratio is generally better. Ideally, you want to keep your credit utilization below 30% of your available credit, and even lower, ideally under 10%, for the best scores. Paying off your balance in full each month not only saves you money on interest charges but also ensures your credit utilization remains low, which is excellent for your credit score.

Paying off your credit card balance in full each month is the single best strategy for improving your credit score while avoiding costly interest payments.

Carrying a balance only serves to enrich the credit card companies through interest payments, not to improve your credit standing. Lenders want to see that you can manage credit responsibly and pay back what you borrow, not that you consistently pay them extra in interest.

Myth 3: Closing Old Credit Cards Is Good for Your Credit Score

It seems logical: fewer cards, less debt potential, better score, right? Wrong. This is another one of those credit score myths that can backfire spectacularly. When you close an old credit card account, you inadvertently take a few hits to your credit score.

Reduced Available Credit: Closing a card reduces your total available credit, which can instantly increase your credit utilization ratio if you have balances on other cards. For example, if you have two cards, each with a $5,000 limit, and you carry a $1,000 balance on one, your utilization is 10% ($1,000 / $10,000). If you close the unused card, your total available credit drops to $5,000, making your utilization 20% ($1,000 / $5,000) – a jump that could negatively impact your score.
Shorter Credit History: The length of your credit history is a significant factor in your credit score. Older accounts contribute positively to your average age of accounts. When you close an old card, it eventually falls off your credit report, which can shorten your overall credit history and potentially lower your score.

Unless there's a compelling reason, like an annual fee you can't justify or a temptation to overspend, it's generally best to keep old credit cards open, even if you rarely use them. Just make sure to use them occasionally for small, manageable purchases (like a streaming service subscription) and pay them off in full to keep them active and contributing positively to your credit profile.

Myth 4: You Only Have One Credit Score

Many people believe there's a single, universal credit score out there that every lender uses. This is simply not true. While the FICO Score is the most widely used, there are actually hundreds of different credit scoring models, and your score can vary significantly depending on which one is used.

Here's why you might see different numbers:

Different Scoring Models: Besides the classic FICO Score, there's VantageScore, which is another popular model. Both use slightly different algorithms.
Variations Within Models: Even within FICO, there are different versions (e.g., FICO 8, FICO 9, FICO Auto Score, FICO Bankcard Score) tailored for specific types of lending. Your auto loan score might prioritize different factors than your mortgage score.
Credit Bureaus: Your credit report data comes from three major credit bureaus: Equifax, Experian, and TransUnion. While they typically have similar information, minor differences in reporting or timing can lead to slightly different scores from each bureau.

The important takeaway is not to obsess over minor score differences, but to focus on maintaining healthy credit habits across the board. The fundamental principles of good credit — paying bills on time, keeping utilization low, and having a long, diverse credit history — will positively impact all your scores.

Myth 5: You Can Remove Negative Information from Your Credit Report Instantly

It's tempting to believe that a quick call or a dispute will make those late payments or collections disappear from your credit report overnight. While you absolutely should dispute any errors on your credit report, legitimate negative information generally has to run its course.

Most negative items, such as late payments, defaults, or collections, can remain on your credit report for up to seven years. Bankruptcies can stay for up to 10 years. During this time, they will gradually have less impact on your score as they age, especially if you establish a consistent pattern of positive payment history afterward.

Beware of companies promising to 'fix' your credit instantly by removing accurate negative information. While credit repair services can help you dispute errors or negotiate with creditors, they cannot legally remove accurate negative entries before their statutory reporting period ends. The best way to mitigate the impact of negative information is to focus on responsible financial behavior moving forward: paying all bills on time, keeping credit utilization low, and avoiding new debt.

The Bottom Line

Navigating the world of credit can feel like traversing a minefield, but it doesn't have to be. By debunking these prevalent credit score myths, you're not just gaining knowledge; you're empowering yourself to make smarter financial decisions that can save you thousands of dollars over your lifetime. Your credit score is a dynamic reflection of your financial behavior, and understanding how it truly works is the first step toward building a robust financial future. Focus on consistent, responsible credit management, and watch your financial opportunities grow.

About the author

Maya Singh

Maya Singh writes for Moneyme on Banking, vetting offers and comparing providers so readers can choose with confidence.