A strong credit score opens doors to better loan rates, credit approvals, and financial opportunities, yet many people unknowingly hold onto myths that hurt their financial standing. Misconceptions about credit limits, inquiries, and debt can lead to costly mistakes. Believing that checking your own credit lowers your score or that closing old accounts improves it may be doing more harm than good. Understanding the truth behind these myths can help you build and maintain a healthier financial future.
Checking Your Credit Score Hurts Your Score
Many people avoid checking their credit score out of fear that it will drop. The truth is, checking your own credit—often called a “soft inquiry”—has no impact on your score. Soft inquiries occur when you request a credit report from a bureau or use a credit monitoring service.
On the other hand, “hard inquiries,” which happen when lenders check your credit for a loan or credit application, can lower your score slightly. However, even hard inquiries have a minimal effect unless too many occur in a short period. Monitoring your credit regularly helps you catch errors, detect fraud, and track progress without penalty. Staying informed about your credit is a smart financial move, not a harmful one.
Carrying a Credit Card Balance Helps Your Score
A common misconception is that carrying a balance on your credit card improves your credit score. In reality, it only increases interest payments without any credit score benefit. Your credit utilization ratio—the amount of credit you use compared to your total available limit—plays a significant role in your score. Keeping this ratio low (ideally under 30%) helps your credit standing.
Paying off your balance in full each month not only saves you money on interest but also demonstrates responsible credit management. Lenders prefer to see that you can borrow responsibly and pay on time, rather than carrying unnecessary debt. Instead of holding a balance, focus on making on-time payments and keeping your credit utilization in check.
Closing Old Credit Accounts Improves Your Score
It might seem logical to close unused credit accounts, but doing so can actually hurt your credit score. One of the key factors in determining your score is credit history length—keeping older accounts open helps maintain a longer credit history, which lenders see as a sign of responsible credit management.
Additionally, closing accounts reduces your available credit, which can increase your credit utilization ratio—a crucial factor in score calculations. A high utilization rate signals that you may be over-reliant on credit, negatively affecting your score. Instead of closing old accounts, consider keeping them open and occasionally using them for small purchases to keep them active. Managing credit wisely means thinking long-term, not just making quick fixes.
Only High-Income Earners Have Good Credit
Your income has no direct impact on your credit score. While a higher income may help you manage bills more easily, credit scores are based on your payment history, credit utilization, length of credit history, new credit inquiries, and credit mix—not your salary. A person with a modest income who pays bills on time and keeps credit balances low can have a higher credit score than someone earning six figures but frequently missing payments.
Lenders may consider income when determining your ability to repay a loan, but it doesn’t influence your credit score itself. Financial responsibility, not income level, is the key to maintaining strong credit. Managing debt wisely and making payments on time are far more important than how much you earn.
You Only Need a Good Credit Score When Applying for a Loan
Many people assume that credit scores only matter when applying for a loan or credit card, but your credit history affects far more than just borrowing. Landlords often check credit reports before approving rental applications, and insurers may use credit scores to determine premium rates. Some employers even review credit histories when hiring for positions that require financial responsibility.
Poor credit can limit your options beyond just borrowing—it can impact housing, job opportunities, and even your ability to get utility services without deposits. Maintaining a strong credit score ensures access to better financial and lifestyle opportunities. Treating credit as a long-term asset, rather than just something needed for loans, helps build a more secure financial future.
Debit Cards Help Build Credit
Using a debit card for purchases may be convenient, but it does nothing to improve your credit score. Debit card transactions come directly from your bank account and are not reported to credit bureaus. Credit scores are built through responsible borrowing and repayment, which debit cards don’t involve.
To establish or improve credit, consider using a credit card for small, manageable purchases and paying off the balance in full each month. Alternatively, secured credit cards or credit-builder loans are great options for those looking to build credit. While debit cards are useful for managing daily expenses, they won’t contribute to a stronger credit history. To improve your score, focus on using credit responsibly rather than relying on debit transactions.
Credit Knowledge is Financial Power
Misconceptions about credit scores can lead to costly mistakes, but understanding the truth puts you in control of your financial future. By checking your credit regularly, keeping old accounts open, and avoiding unnecessary debt, you can build a stronger score without falling for common myths.
Good credit isn’t about income—it’s about responsible habits. The more informed you are, the better financial decisions you can make. A healthy credit score opens doors, and smart management keeps them open.