Bad credit advice spreads faster than good credit advice. Probably because the wrong information is usually simpler and more dramatic.
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“Never close a credit card!” “Carrying a balance builds credit!” “Checking your score hurts it!” These myths persist despite being repeatedly debunked, and believing them can cost you real money and real points.
Myth: Carrying a balance improves your credit score
This is the most expensive myth out there. The idea is that paying interest shows lenders you’re a responsible borrower. It’s completely wrong. Credit scoring models care about whether you make payments on time and how much of your available credit you’re using. They don’t care whether you pay interest.
Paying your balance in full every month gives you the best possible combination: on time payments (good) with low utilization at statement time (also good). Carrying a balance just means you’re paying interest for no benefit. At 22% APR on a $2,000 balance, that’s roughly $440 a year in interest payments that do nothing for your score.
Where this myth probably started: you do need to use your card for it to help your score. A card that sits unused for months might not report any activity. But using it for a small purchase each month and paying it off immediately is all you need.
Myth: Checking your own credit hurts your score
Checking your own credit score or pulling your own credit report is a soft inquiry. It has zero effect on your score. You could check it every single day and your score wouldn’t move by a single point.
This myth keeps people from monitoring their credit, which is the opposite of what you should do. Regular monitoring helps you catch errors, spot identity theft early, and track your progress. Use the free tools available through your bank, Credit Karma, or annualcreditreport.com.
What does hurt your score is when a lender checks your credit because you applied for something. That’s a hard inquiry, and it’s a different thing entirely.
Myth: Closing old cards is always bad
You’ll read everywhere that you should never close a credit card. The reasoning is that it reduces your available credit (raising utilization) and eventually shortens your credit history. Both true. But “never” is too strong.
If a card charges an annual fee you can’t justify, and the issuer won’t downgrade it to a no fee version, closing it might be the right move. Paying $95 a year to preserve a slight credit score advantage rarely makes financial sense. Run the numbers. If the fee costs more than the score benefit is worth, close it.
Also, a closed card doesn’t immediately vanish from your report. Closed accounts in good standing remain on your report for 10 years, continuing to contribute to your credit history length during that time. The utilization impact is immediate, but the history impact is delayed.
Myth: You only have one credit score
You have dozens of credit scores. FICO alone has multiple versions (FICO 8, FICO 9, FICO 10, plus industry specific versions for auto lending and credit cards). VantageScore is a separate model entirely. Each of the three credit bureaus has slightly different data, producing slightly different scores.
The score your banking app shows you is likely a VantageScore 3.0 from one bureau. The score your mortgage lender uses might be a FICO 2, 4, or 5 (yes, they use older models) from all three bureaus, taking the middle score. These numbers can differ by 20 to 50 points or more.
This doesn’t mean monitoring is pointless. The trends are consistent across models. If your VantageScore is going up, your FICO is almost certainly going up too. Just don’t be shocked when a lender tells you a different number than what you see on your phone.
Myth: Paying off debt always helps your score immediately
Paying off credit card debt usually helps because it reduces utilization. But paying off installment loans (car loans, student loans, personal loans) can actually cause a small, temporary score drop. This happens because closing the account reduces your credit mix and lowers the number of active accounts.
This doesn’t mean you should keep paying interest on an installment loan just to preserve your score. The dip is typically 5 to 15 points and recovers within a month or two. The financial benefit of being debt free far outweighs a brief score fluctuation.
Paying off collections is more complicated. Under older FICO models (still widely used), a paid collection account counts the same as an unpaid one. The damage was already done when it went to collections. FICO 9 and 10 ignore paid collections, but many lenders haven’t upgraded to these models yet. If you’re going to pay a collection, try to negotiate a “pay for delete” where the agency removes the account from your report entirely.
Myth: Income affects your credit score
Your salary, savings, investments, and net worth are not factors in your credit score. A person earning $40,000 with two well managed credit cards and a small auto loan can have a higher score than someone earning $400,000 who’s defaulted on a credit card.
Income matters for lending decisions separately from your score. A lender might approve you based on your credit score but offer a lower loan amount based on your income. But the score itself is purely about your borrowing and repayment behavior.
Myth: All debt is equal in the eyes of credit scoring
Credit scoring models treat different types of debt differently. Credit card debt (revolving) has a much larger impact on your score than mortgage debt (installment) of the same dollar amount. A $5,000 credit card balance affects your score more negatively than a $200,000 mortgage balance, because the utilization ratio on the credit card is what matters.
Medical debt is also treated differently under newer models. FICO 9 weighs medical collections less heavily than other types. And as of 2023, medical debts under $500 are no longer reported to the credit bureaus at all.
Understanding these distinctions helps you prioritize which debts to tackle first if you’re trying to improve your score quickly. Credit card balances should be your first target, followed by any collections you can get removed.