Credit Score Myths That Are Keeping You Broke

Your credit score isn’t just a number — it’s financial currency. Yet so many people are financially held back not because of their income or spending habits… but because of credit score myths they think are true. These misconceptions can lead to poor decisions that cost you money, time, and opportunities.

Let’s bust these myths so you can take control of your financial future.

Why Your Credit Score Matters

Before we dive into the myths, a quick reminder:

Your credit score affects:

• Loan approvals — mortgages, auto loans, personal loans 👉 see how credit scores impact approval odds on FICO®.
• Interest rates — lower scores usually mean higher rates.
• Insurance premiums — some providers use credit scores to price policies.
• Rental applications — landlords often check credit history.
  For more details on what goes into your credit score, visit Experian’s guide to credit scoring.

Now — onto the myths that might be keeping you broke.

Myth #1: Checking Your Credit Hurts Your Score

One of the most common myths is that every time you check your credit score, it drops.

👉 Reality:
There are two types of credit inquiries:

• Soft inquiries — checking your own score or prequalification checks — do not affect your score.
• Hard inquiries — when lenders check your score during loan applications — may impact your score slightly and temporarily.
  To learn the difference in detail, check out this explanation from TransUnion.

Bottom line: Regularly checking your own credit is good practice and won’t hurt your score.

Myth #2: Closing Old Accounts Improves Your Credit

You might think closing old credit cards helps by reducing risk.

👉 Reality:
Closing old accounts can harm your credit score. Why?

• It reduces your credit history length — an important factor in scoring.
• It lowers your available credit, increasing your credit utilization ratio — another key metric.
  Credit utilization is the amount of credit you’re using compared to your total available credit — and it accounts for about 30% of your score.

Myth #3: Your Income Determines Your Credit Score

This one trips up a lot of people.

👉 Reality:
Your income is not part of your credit score calculation.
Credit scores are based on:

1. Payment history
2. Credit utilization
3. Length of credit history
4. New credit inquiries
5. Credit mix

So no matter how much money you make, your score depends on how you manage credit.

Myth #4: You Only Need a Credit Score if You Want a Loan

You might think credit only matters when borrowing money.

👉 Reality:
Credit affects many parts of life, including:

• Renting an apartment
• Utility deposit costs
• Insurance premiums
• Some job background checks

Even if you never borrow, having a strong credit score can save you money and stress.

Myth #5: Paying Off a Debt Removes It from Your Credit Report

It’s easy to assume that once you pay something off, it disappears.

👉 Reality:
Positive and negative accounts may stay on your credit report for years.
For example:

• Closed accounts in good standing can remain for up to 10 years.
• Late payments may stay for up to 7 years.

But — old negatives lose impact over time and may eventually drop off your report, helping improve your score.

Myth #6: You Need Perfect Credit to Buy a Home

While lenders do prefer better scores, “perfect” is not required.

👉 Reality:
There are loan options for various credit profiles, including:

• FHA loans
• VA loans
• Some conventional loans

Each has different minimum score requirements and down payment options. So don’t assume you’re out of the game based on one number.

How to Improve Your Credit Score (Quick Wins)

Here are practical steps that actually work:

✔ Pay bills on time — consistently.
✔ Reduce your credit utilization below 30%.
✔ Avoid opening too many accounts at once.
✔ Keep old accounts open if they’re in good standing.
✔ Review your credit report annually at AnnualCreditReport.com.

Final Word: Don’t Let Myths Control Your Money

Myths aren’t harmless — they shape your financial decisions. By separating fact from fiction, you can:

• Save money on interest
• Qualify for better loan terms
• Improve your financial confidence

Your credit score doesn’t have to be a mystery. Understanding it empowers you to make smarter financial choices — and that’s how wealth grows.