Skip to content

What are the Top 7 Credit Score Myths

Are you a believer in any of the credit myths below? Credit scores are important, three-digit numbers that help you access money, specifically credit. Lenders use this number to “score” your loan application, and to decide if you’re reliable enough to lend to. If you don’t seem reliable, lenders may increase interest rates or not lend to you at all. 

Importance of Credit Score

Credit is necessary for many facets of life. Your credit score helps you access credit to buy a house, car, and more. It also plays a role in how lenders decide what interest rate to offer you. High credit scores give people access to more credit, and with lower interest rates. Low credit scores give people less access to credit, and with higher interest rates. 

7 Debunked Myths

#1: Checking Your Credit Score Hurts Your Score

The first of the credit myths says checking your credit does not hurt your credit score. However, there are soft and hard credit checks for credit, and each one has varying impacts on your score and what appears in your credit history. A soft check occurs when you check your own credit score, or if a lender sends you a promotional credit card offer. Soft credit checks do not impact your credit scores and are not visible to lenders who check your credit. Checking your credit score helps ensure your information is accurate, and catches identity theft quickly if it occurs.

Hard credit checks occur when a lender checks your credit after you apply for a loan or credit card. Potential lenders can see hard credit checks in your credit history. If you’re comparing mortgage rates, the credit bureau will usually assess the multiple hard checks as one big check. However, you must conduct them in a reasonable time frame (12-45 days). If multiple credit card companies check your credit score, there are separate marks on your credit history. 

#2: Income Can Affect Your Credit Score

Your income is an important consideration for lenders in deciding whether or not to lend to you. However, income has no bearing on your credit score. Credit scores take into account the amount of debt you have, payment history, length of credit history, and other factors. Of all the credit myths out there, this is the most innacurate.

#3: Having Debt Hurts Your Credit Score

Having more debt than you can handle might hurt your score, but having debt in general is actually great for your credit score. They consider your credit history when calculating your credit score. As you begin your financial journey, start with debt you can handle, and diverse debt if you can. Having a cell phone and secured credit card are great first steps. After that, take on more debt if your income and life scenario can adequately manage it. Don’t take on enough debt to overextend yourself – make sure you use your credit, but you aren’t reaching the limit on each account. 

#4: Cancelling Credit Cards Helps Your Credit Score

Cancelled, or closed credit cards can stay on your credit report for up to 10 years and hurt your credit score. A closed account can also weaken your credit utilization rate, which is your available credit compared to your used credit. Even if your balance is paid, avoid cancelling credit cards unless the fees are too high, or if you’re having trouble budgeting and the card is contributing to overspending. 

#5: Marriage Affects Credit Score

Some might think that if you’re married to someone with poor credit, your credit score will be affected. This is untrue. Your credit score evaluates your debt payment reliability, and yours only. The credit of your spouse, children, parents, siblings, or anyone else you live with, have no impact on a credit bureau’s calculation of your credit score. It’s actually illegal for creditors to use a borrower’s relationship status as a factor for considering a loan application, unless they apply jointly. 

If you apply for a loan with a co-signer, your credit could be impacted indirectly, but not as a result of your relationship with that person. If one of you fail to make payments on time, both your credit scores could be affected. 

#6: Paying Old Debts Removes Their Mark from Your Credit History

Unfortunately, records of late payments stay on your credit report for up to 7 years, starting from the date of the missed payment. Make sure you are always aware of your payment dates, and set an alarm if necessary to ensure you don’t miss them. 

#7: Credit Scores are Always Accurate

Credit bureaus are established, credible practices. Equifax and TransUnion are well-known across North America and internationally, and have a long history of business. Their history might make it easy to forget that like all companies, there are human elements and sources for error. Credit bureaus make mistakes too, be it regarding a debt you owe, your personal information, or the amount of credit you have taken on. If you see something that looks fishy on your credit score, call the credit bureau to inquire. Equifax has a dispute process where consumers submit a dispute, and Equifax conducts an investigation. 

Final Thoughts

If you’ve bought into any of the above credit myths, don’t worry. You’re not the only one, and there are many ways to improve your credit score. Paying bills on time, keeping your credit forms limited to your means, and practicing good budgeting can all help improve credit. 

If you’re currently struggling with improving your credit, speak to one of our counsellors today. 

Was this article helpful?

What is your total credit card debt amount?

Provide a few details about yourself.