Credit scores are wrapped in more myths and misinformation than almost any other financial topic. Some of these myths are just harmless misunderstandings — others are actively costing people points every month. Here are the 10 most common and expensive ones, set straight.
Myth 1: Checking Your Own Credit Hurts Your Score
Truth: Checking your own credit — called a “soft inquiry” — has absolutely zero impact on your score. The confusion comes from conflating soft inquiries (you checking your own credit, or background checks) with hard inquiries (a lender pulling your credit when you apply for a loan or credit card). Only hard inquiries can temporarily ding your score, and even those typically cause a drop of only 2–5 points.
You should check your credit report at least once a year — and more frequently if you’re actively working on your credit. AnnualCreditReport.com lets you pull all three reports for free.
Myth 2: You Only Have One Credit Score
Truth: There are dozens of credit scoring models. FICO alone has 28+ versions — including mortgage-specific scores (FICO 2, 4, 5), auto loan scores (FICO Auto Score 8), and card scores (FICO Bankcard Score 8). VantageScore (used by Credit Karma) uses a separate algorithm. The score you see on a free app may be 20–50 points different from what a mortgage lender sees.
Myth 3: Income Affects Your Credit Score
Truth: Your income is never reported to credit bureaus and has no impact on your credit score. A person earning $40,000/year with perfect payment history and low utilization will have a higher credit score than a $200,000 earner with late payments and maxed-out cards.
Myth 4: Closing Old Credit Cards Helps Your Score
Truth: Closing credit cards almost always hurts your score — for two reasons. First, it reduces your total available credit, which increases your utilization ratio. Second, if it’s one of your oldest accounts, closing it can shorten your average account age (which makes up 15% of your FICO score). Keep old cards open, even if you rarely use them. Charge a small recurring expense to them monthly and pay it off in full.
Myth 5: Paying Off a Debt Removes It from Your Credit Report
Truth: Paying off a debt — whether a collection, charge-off, or old credit card balance — does not remove it from your credit report. It simply changes the status from “unpaid” to “paid.” The negative entry remains for seven years from the original delinquency date. To actually remove it, you need a pay-for-delete agreement (for collections) or a successful dispute.
Myth 6: Carrying a Balance Builds Credit
Truth: This myth has cost people thousands of dollars in unnecessary interest. You do not need to carry a balance to build credit. You need to use the card and pay it off in full each month. The credit bureau sees that you used credit responsibly — the interest you pay adds nothing to your score and everything to the credit card company’s profits.
Myth 7: A Debit Card Builds Credit
Truth: Standard debit cards are not reported to credit bureaus and do not help build credit. They’re just a way to spend your own money. To build credit, you need accounts that actually report: credit cards, loans, or secured cards.
Myth 8: Being Denied Credit Hurts Your Score
Truth: The denial itself has no impact. It’s the hard inquiry from the application that may cause a small, temporary dip (typically 2–5 points). The denial decision made by the lender is not shared with the bureaus.
Myth 9: You Can’t Dispute Accurate Information
Truth: You can dispute any information on your credit report — the question is whether the bureau can verify it. If a creditor can’t verify the specific details of an accurate account within 30 days, the item must be removed regardless of accuracy. Many older accounts, particularly debts sold multiple times, fail verification.
Myth 10: All Credit Repair Companies Are Scams
Truth: While there are absolutely bad actors in the credit repair industry, many legitimate companies do provide real value — particularly for consumers with complex, multi-bureau disputes. The key distinction: reputable companies don’t make impossible promises, don’t charge before performing services, and don’t offer to create new credit identities. See our vetted list of legitimate credit repair companies.
See our ranked comparison of legitimate credit repair companies with transparent pricing.
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