Credit Score Myths Americans Still Believe

This myth keeps many consumers from monitoring their credit regularly — which is exactly the opposite of what they should do. Credit inquiries come in two types: hard inquiries, triggered when a lender reviews your credit after an application, and soft inquiries, which include checks you initiate yourself. Only hard inquiries can affect your score, and even then the impact is typically small and temporary. Checking your own report through a bureau or a credit monitoring service is always a soft inquiry. In fact, reviewing your report regularly is one of the best ways to catch errors or signs of fraud early.

This myth likely originated from a misunderstanding of how card activity is reported. Lenders do report your account activity to bureaus, but what helps your score is demonstrating responsible use — not carrying debt. When you carry a balance, your credit utilization ratio (the percentage of available credit you're using) remains elevated, which can drag your score down. More importantly, carrying a balance means paying interest, which adds cost with no credit benefit. Pay your statement balance in full each month to keep utilization low and avoid unnecessary interest charges. For more on how utilization affects your score, see our article on how credit utilization works.

Two important scoring factors work against you when you close an old card. First, closing an account reduces your total available credit, which increases your overall utilization ratio even if your balances stay the same. Second, the average age of your accounts is a factor in most credit scoring models — and removing an older account from the equation can shorten that average. If a card has no annual fee, keeping it open and using it occasionally (then paying it off) is generally better for your score than closing it. If a card does carry a fee you can't justify, weigh the cost against the credit impact before deciding.

Paying off a debt in collections is financially responsible and can improve your creditworthiness in lenders' eyes — but it does not automatically erase the record. The collection entry, now marked as paid or settled, usually stays on your report for up to seven years from when the original account first went delinquent. Some newer scoring models weigh paid collections less heavily than unpaid ones, so settling the debt is still worthwhile. If you believe a collection appears in error, you have the right to dispute it. Our guide on disputing errors on your credit report outlines how the process works.

A perfect 850 is largely a bragging right, not a functional financial target. Lenders typically tier their interest rates in bands, and once your score clears a lender's top tier — which varies by lender but is often in the 760–780 range — you generally qualify for the same rates as someone with an 850. Chasing perfection by, say, opening unnecessary accounts or obsessing over minor score fluctuations is unlikely to save you money. A more practical goal is understanding what score range a specific lender uses for its best pricing, then working toward that threshold.

Credit scores are calculated using information from your credit report, which contains data about accounts, balances, payment history, and inquiries — not income, employment status, or net worth. A high earner who misses payments and carries large balances will have a lower score than a modest earner who pays on time and maintains low utilization. Lenders may separately consider income when evaluating a loan application (to assess your ability to repay), but that's a different evaluation from your credit score itself. If you're building credit from scratch, consistent on-time payments matter far more than how much you earn.