Credit Score Myths That Could Be Costing You Money

You have been making smart financial moves - paying bills on time, keeping spending in check, maybe even opening a credit card to start building history. But if some widely repeated "wisdom" about credit scores has been quietly steering your decisions, you could be working against yourself without knowing it.

Credit scores shape more than most people realize: loan approvals, interest rates, apartment applications, and sometimes even employment background checks. Getting the mechanics wrong is not a small thing. Here is what the evidence actually says about five of the most common misconceptions.

Myth 1: Checking Your Own Credit Score Hurts It

This myth keeps people from monitoring their own financial health, which makes it particularly costly. Checking your own credit report or score is classified as a "soft inquiry." Soft inquiries have no effect on your score and are not visible to lenders, regardless of how often you check (CentByStep, 2025).

A "hard inquiry" is different. That happens when you formally apply for new credit - a mortgage, auto loan, or credit card - and the lender pulls your report to make a lending decision. Hard inquiries may reduce your score by a small amount, and the effect generally fades over roughly a year (CentByStep, 2025).

The practical cost of believing this myth is real: people avoid monitoring their own reports, miss errors, and sometimes discover problems only when they apply for something important. Checking your credit regularly is a habit worth building, not avoiding.

Myth 2: Carrying a Balance Builds Your Credit Score

The idea that leaving a small balance on your card each month signals responsible use to lenders is surprisingly persistent. It does not. What scoring models actually measure is whether you use credit and pay on time - not whether you carry a balance forward and pay interest on it.

According to FICO's published scoring model, payment history accounts for approximately 35% of your score, and credit utilization - the ratio of your balance to your available credit limit - accounts for roughly 30% (myFICO, as cited in AmeriSave, 2025). Carrying a balance increases your utilization ratio, which can work against your score, and it generates interest charges that cost you money with no scoring benefit in return.

Paying your statement balance in full each month keeps utilization low and builds the same positive payment history - without the added cost.

Myth 3: Closing an Old Credit Card Is Always a Smart Move

It seems logical: you have a card you never use, so you close it to simplify your finances. In practice, this can affect your score in two ways.

First, closing a card reduces your total available credit, which raises your overall utilization ratio if you carry balances on other cards. Second, it can reduce the average age of your credit accounts, which is part of the length-of-credit-history factor that makes up about 15% of your FICO score (myFICO, as cited in AmeriSave, 2025). If the card you close is one of your oldest accounts and it is in good standing, the impact can be meaningful (Experian, 2024).

This does not mean closing a card is never the right call. But the decision is more nuanced than it might appear, and the timing relative to major financial applications matters. These trade-offs are worth reviewing with a qualified financial professional before acting.

Myth 4: Your Income Affects Your Credit Score

Income does not factor into your credit score calculation - not directly, not indirectly. FICO and VantageScore models are built entirely from information in your credit report: payment history, amounts owed, length of history, new credit, and credit mix. Your salary, your job title, and your bank balance are not part of that report (CentByStep, 2025).

Lenders may consider your income separately when evaluating a loan application, but that is a different process from calculating your score. Someone earning a modest income with a consistent record of on-time payments can carry a higher score than a high earner with a history of missed payments.

Myth 5: A Perfect Score Is the Goal

A score of 850 is technically achievable, but chasing it as a primary target can miss the point. Most lenders generally reserve their most competitive rates for borrowers in the "very good" or "exceptional" range, which tends to start around 740 to 760 depending on the lender and loan type (AmeriSave, 2025). The practical difference in loan terms between a 760 and an 850 is often negligible.

A more useful frame is: what score range may be relevant for the specific financial goal you are working toward? A mortgage, a car loan, and a credit card each have different thresholds. Understanding what actually moves your score - consistent payments, low utilization, a long and varied credit history - is more actionable than fixating on a three-digit ceiling.

Credit scores are not mysterious. They follow documented rules that are publicly available. These myths persist partly because they contain a grain of logic, and partly because the financial system can feel opaque. Getting accurate information is the first step to making it work for you rather than against you.