The Truth About Credit Health and Common Credit Score Myths

Understanding credit health and how credit scores work is essential for making informed financial decisions. Unfortunately, many myths surround this topic, leading to confusion and misinformation. Let's debunk some of the common credit score myths and shed light on maintaining a healthy credit profile.

Myth: Checking Your Credit Score Lowers It

Fact: Checking your own credit score is considered a "soft inquiry" and does not impact your score. In fact, regularly monitoring your credit score is a good habit that helps you stay informed about your financial standing.

Myth: Closing Old Accounts Improves Your Credit Score

Fact: Closing old accounts can actually hurt your credit score as it may reduce the average age of your accounts and overall credit history, which are factors that influence your score. Keeping old accounts open (especially if they are in good standing) can be beneficial for your credit health.

Myth: Carrying a Balance on Your Credit Card Helps Your Score

Fact: Carrying a balance on your credit card does not improve your credit score. In fact, it can lead to unnecessary interest charges. It's best to pay off your credit card balance in full each month to maintain a good credit utilization ratio.

Myth: Closing Credit Cards Boosts Your Score

Fact: Closing credit cards can actually lower your credit score, especially if it reduces your total available credit. This can increase your credit utilization ratio, which may negatively impact your score. Consider keeping the accounts open but using them responsibly.

Myth: Only Income Affects Your Credit Score

Fact: While income is not directly factored into your credit score, it can indirectly impact your ability to manage credit. Factors such as payment history, credit utilization, credit history length, new credit accounts, and credit mix are what primarily determine your credit score.

Improving Your Credit Health

To maintain a healthy credit profile, it's essential to pay your bills on time, keep your credit card balances low, avoid opening multiple new accounts at once, and regularly check your credit report for errors. By practicing responsible credit habits, you can improve your credit score over time.

Remember, a good credit score can open doors to better loan terms, lower interest rates, and increased financial opportunities. Stay informed, debunk the myths, and take control of your credit health today!

For more information on credit health and credit scores, visit FTC's Free Credit Reports.