The Truth about Your Credit Score: Top 8 Myths Debunked


When it comes to exploring your credit card consolidation options, it’s natural to wonder how – and if – your credit score will be impacted.

Having a strong credit score is important, as it will affect how much you can borrow, as well as the interest rates that will be applied to your loans. Nonetheless, there are numerous myths that circulate about credit scores in general, what impacts them, and how this will affect your financial future. In this blog post, we will debunk eight of the most common credit score myths.

#1: Paying off my debt will instantly increase my credit score

While it’s important to pay off your debts as quickly as possible, and while eliminating your debt will increase your credit score over time, it will not happen instantaneously. A key factor in credit scores is the relationship between the total debt balance and your total credit limit. As such, any increase in your credit score after you pay your debts will depend on your credit history.

#2: The less I use my credit cards, the better my credit score will be

This isn’t necessarily true. In fact, using your credit card to make small purchases like groceries or gasoline will show your lenders that you are a responsible borrower. Using your card, then, can actually help you build a positive credit history, which will, in turn, increase your score. Take caution, though: This only applies if you make your payments on time and don’t consistently carry a balance!

#3: My net worth affects my credit score

Credit reports do not incorporate your bank account balances or assets. Because of this, your overall net worth will not impact your credit score. Keep in mind, though, that this may change if you default on payments and your credit agencies turn your accounts over to a collections agency. These agencies are aggressive in pursuing debts and will be seeking assets to levy in the event they obtain a civil judgment against you.

#4: If my credit score is good, I can borrow a lot more

While it’s true that lenders generally prefer borrowers with a solid credit history, you should always, as a general rule, borrow the least amount possible to avoid accruing more debt than you should. After all, reaching a negative credit card limit will severely lower your credit score.

#5: My credit score decreases every time someone pulls my credit report

Contrary to popular belief, whether this is true actually depends on how your report is pulled. When you apply for a loan, your prospective lender will pull your report to make a “hard inquiry” into your credit history. This will impact your credit score, but only by a few points. On the other hand, when a creditor reviews only a small portion of your credit report to simply gather information (a “soft inquiry”), you likely won’t see an effect on your score.

#6: My income affects my credit score

Your income – in no matter what form – is not used to calculate your credit score. What does comprise your score, however, is your payment history, account balances, credit history, your existing forms of credit, and new credit applications you open.

#7: Closing my credit cards and other accounts will increase my score.

The opposite is actually true: Closing your accounts can actually decrease your score, as it reduces the amount of credit available to you and thus, your opportunity to build up a positive credit history. The concept underlying this myth is called “credit utilization,” which refers to the amount of credit you use compared to the amount you have available to you.

#8: I don’t have any credit cards or credit card debt, so my credit score must be good

While having credit cards and managing them responsibly does impact your credit score, the reverse is not true: If you don’t have a credit account, you have no credit history, which is what helps you build a strong credit score over time. If you intend to take out a loan to finance a large purchase, your lenders will want to see that you are a responsible borrower, and if you have no paper trail in the form of years of responsible credit card use, they will not be able to verify this.

It’s vital to keep a close eye on your credit score, to know what impacts it and what doesn’t, and to educate yourself about your rights. By doing so, you’ll avoid costly mistakes, unnecessary stress, and excessive debt. Feel free to contact us if you have specific questions about how a debt relief program or debt consolidation loan might affect your credit score.