5 Credit Score Myths, Debunked

by: holli casto
vp of training and development
Published 3/18/2024

Credit scores, by their very nature, can seem a lot like an enigma. This can cause a lot of confusion and lead to a lot of misinformation about them. Here are five common myths about credit scores, and why they're myths.
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1. Checking your credit score will hurt your score 

There are multiple types of credit inquiries, some of them show up on your credit report and hurt your credit score while others do not. The key terms you need to understand here are hard credit inquiry and soft credit inquiry. Hard inquiries are what lenders pull when processing your loan applications, these inquiries will show up on your credit report and damage your credit report. Soft inquiries are how you can check and monitor your credit score and report without causing any harm. There are a couple of ways for you to keep track of your credit score, the first is by visiting annualcreditreport.com, which is where you can request a complete copy of your credit report from each of the three credit bureaus each year. The catch here is you can only do this once a year. There are other monitoring services that contract with one of the credit bureaus that will give you ongoing information about your credit score through a soft pull. As a P1FCU member, you have access to My Credit Journey through your Online and Mobile banking that provides you with access to your credit score through Transunion.  

2. Income affects credit score 

Your credit score is based on five factors, credit utilization, length of credit, credit report inquiries, and credit mix. Notably income is not included in this list. Lenders might look at your monthly income in addition to your credit score when evaluating your loan application, but your income does not affect your credit score. While your income may affect your ability to repay your loans, your income does not fit into the equation of calculating your credit score. You can absolutely have a high credit score while having a low income, and vice versa, you can have a low credit score and a high income. Credit scores are based on behavior. 

3. Carrying a balance on your credit card statement improves your credit score.  

Credit utilization, or the amount of credit you are using divided by the amount of credit you have extended to you, is one of the categories that impacts your credit score. Each month, there is a date your credit card company will generate a statement, the balance you have at the time of the statement is your statement balance. Even if you pay your credit card statement in full each month, these balances are reported to the credit bureaus as credit that you are using, therefore increasing your credit utilization. If you can, try to pay your credit card before it statements so that your credit utilization goes down. 

4. You only have one credit score 

There are three credit bureaus that collect your information and create your credit score. These three credit bureaus are Equifax, Experian, and Transunion. These bureaus each weigh the different categories of that comprise your credit differently and have slightly different ranges for their credit scores, all falling within 280 and 850. These agencies calculate your credit score based on data pulled from FICO or Vantage score. Lenders may source your credit score from one of the three credit bureaus, or they may use FICO or Vantage scores.  

5. You cannot get credit if you don't already have it 

If you've never borrowed any money, you may not have a credit score or report yet. That said, there are options available to you if you don't have a report or you have a poor rating. You can apply with a coborrower, or you can apply for a secured line of credit. A secured line of credit requires you to put cash down as collateral for the amount you're borrowing against. Once you've established that you will consistently repay your line of credit and not overutilize the credit extended to you, after a set period of time your lender will give you the funds back. By applying for and using your credit, you are building your credit and improving your credit history, which will in turn help you apply for more loans in the future.  
Do you want to learn more about credit scores and how they work? Click here to subscribe to our comprehensive series on credit scores!

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This is for educational purposes only and not financial advice.