20 Credit Myths It’s Time for You to Stop Believing

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Credit scores can be a stressful topic. It’s hard enough trying to make all the right decisions with our money – but then to have people scoring us on our money decisions? Yikes.

If you feel stressed out about your credit score, just remember: credit scores are nowhere near as complicated as they seem. In fact, the only reason they seem so complicated is because of the insane amount of credit score myths out there today.

For your peace of mind, we’ve put some of the biggest credit myths to rest, once and for all. Below are 20 credit score myths you should stop believing ASAP.

20 credit myths you should ignore

1. Carry a credit card balance

This is one of the worst credit card myths out there – that you have to carry a balance over from month to month on a credit card to build credit.

However, it’s simply not true. You have to use credit to build credit, but carrying a balance on your credit card is a recipe for debt.

Not only do you not have to carry a balance from month to month to build credit, your credit will actually be better if you keep your balances as low as possible.

That’s thanks to the concept of a credit utilization ratio – how much credit you use in relation to how much credit you have access to. An ideal credit utilization ratio is 30 percent or less. The smaller your credit balance, the lower your credit utilization ratio and the higher your credit score will be.

Go ahead and use that credit card to build credit. Just be sure to pay it off in full each month.

2. Avoid applying for new credit

One credit scoring factor is new credit inquiries. Since this is a factor of your score, many people fear that having too many inquiries on your credit report will hurt their score. This ultimately morphed into the idea that you should avoid new credit inquiries on your report.

While it’s true that you don’t want to have too many new inquiries, don’t let that prevent you from applying for credit when you need it. Like all things, just don’t go overboard.

3. Rate shopping hurts your credit

Again, don’t let the fear of too many new credit inquiries hurting your score prevent you from getting the best interest rate you can on a new loan.

If you’re shopping for a loan, you can rate shop without getting dinged by too many inquiries. Simply keep the shopping window short (apply for all within 14 days) and always apply for the same type of loan and amount.

If you do this, the credit scoring bureaus will batch your loan applications so they don’t come up as separate hits on your credit. They’ll understand that you’re not trying to get approved for all of these loans, you’re looking for the best deal. And there’s no reason to be penalized for that!

4. You have one credit score

It’s pretty easy to fall for this credit score myth that we all have one score, but it’s not true.

As it is, there are two popular credit scores (FICO and VantageScore) and they each have a variety of models that are still in circulation. On top of that, lenders can use their own algorithms based on the products they’re selling. Therefore, we all have upwards of 30 or more credit scores.

That’s why it’s so important to pay more attention to your credit score range rather than your three-digit credit score. Even though your score will vary, it should basically stay within the same range.

5. You can achieve a “perfect” score

Since we all have more than one credit score, that’s the same reason you shouldn’t worry about striving for the “perfect” score.

As fun as it may be to aim for the top, trying to get a perfect score isn’t useful or possible. Even if you hit the top of one type of score, you may not hit it in others.

Again, focus on the range. Get yourself into the best range you can and you won’t be wasting your efforts.

6. Checking your credit hurts your score

There are a lot of things that affect your credit score, but checking your own score or report isn’t one of them.

In the world of credit reports and scores, there are “hard credit inquiries” and “soft credit inquiries.” Hard inquiries happen when you apply for credit; they do affect your score. Soft inquiries happen for a variety of reasons and don’t affect your credit.

When you check your own credit it generates a soft inquiry and won’t affect your credit score.

That’s why it’s important to keep checking your credit reports for errors and to measure your progress. You won’t be penalized for either of these actions.

7. Income impacts your credit score

Because of the nature of credit scores, it’s easy to forget that they’re not a score of your entire financial picture. A credit score is merely a score of how well you handle money that is lent to you.

A credit score is merely a score of how well you handle money that is lent to you.

Things like your income aren’t on your score. It simply has no bearing on how well you manage credit.

8. Student loans hurt your credit

As long as you’re current on your payments. your student loans will not negatively affect your credit score.

However, defaulting on your student loans (on any debt) can be disastrous for your credit score. But if you’re making your payments on time every month, then your student loans can actually help your score.

That’s because your student loans help you build a long-standing relationship with a creditor. Plus, they help you build a payment history. These are two big things that affect your score in a good way!

So if you have a debt load that makes you uncomfortable, at least know that it’s not going to hurt your score as long as you keep paying on it (and doing so on time).

9. Co-signing won’t impact your score

Even if you don’t have student loans yourself, your children or someone else could someday ask you to co-sign on theirs. Understand that you can’t co-sign on someone else’s loan of any kind without potentially affecting your score.

If you co-sign a loan for someone who ends up going into default, that default is going to show up on your score, too. You could also be held responsible for repaying the debt if they don’t end up doing so themselves.

Never enter into a co-signing agreement lightly. And only co-sign on loans that you could afford to repay if necessary.

10. Married people have the same credit score

While we’re on the topic of joint credit, it’s important to note that you and your spouse do not have the same credit score.

Therefore, if you’re afraid the student loans your spouse took on before you got married will hurt your score, don’t be. They’ll only affect your score if you refinance the loans under both of your names.

As for what can affect both of your scores, it’s anything that you’ve signed on for jointly.

For instance, your scores will both be affected if you both signed your mortgage or apartment lease. They’ll also both be affected if you signed on for the same credit card or auto loan. Your scores could even be affected if you add each other as authorized users on your own credit cards.

That said, your scores still won’t be exactly the same. You still have your own individual credit histories and those can cause variances in credit scores even if all of your credit is now joint.

11. Credit reporting errors won’t happen to you

Here’s a really important one: don’t fall for the credit myth that reporting errors are uncommon. They happen and they can happen to anyone.

From a simple accidental switch of a digit in a social security number to a loan or line of credit that you never took out, you have to keep an eye out for inaccuracies on your credit report. Doing so will enable you to spot errors before they can do too much damage.

You can also follow this step-by-step guide to dispute any errors on your credit report you find.

12. Don’t check your credit if you don’t have debt

Some people think that they don’t need to check their credit report if they don’t have debt. That couldn’t be further from the truth.

As mentioned above, it’s important to regularly check your credit report for errors. But that’s not all you’re looking for. Checking your credit report can also alert you to identity theft.

If you never check your credit report, someone could open an account in your name without you ever finding out. Don’t let this happen to you.

You can check your credit report for free three times every year (once from each of the credit reporting bureaus) at AnnualCreditReport.com. Debt or not, take advantage of your right to review your credit report.

13. Your credit score is on your credit report

As for what you can see when you check your credit report, don’t be surprised when your credit score isn’t there. As nice as it would be if these two things were on the same documents for you to view, they’re not.

When you check your credit report, you’re going to see an itemized list of all of your accounts. Your credit score will not appear on this list.

14. Paid accounts drop off your credit report

If you recently paid off debt, you might think that part of your celebration will be the accounts dropping off your report. However, it won’t be.

If you paid off an account that never went delinquent, then it will remain on your credit report for ten years. This isn’t a bad thing, however, as what’s staying on your report is a positive history.

As for settled debts, which usually means it went to collections and you and the collections company agreed to settle it for less than the full amount, they stay on your report for seven years. While it’s a good thing that you took care of the debt, it won’t drop off of your credit report overnight.

15. Close accounts you don’t use

If you have an account you’re not using anymore, it probably seems logical to close them. However, doing so isn’t the best thing you can do for your credit score.

One factor of your credit score is something called length of credit history. Essentially the longer your account history, the stronger your score. That means closing an account that you had a positive history with is robbing yourself of your best possible score.

Even if you’re not using the account anymore, keep it open and benefit from the history length.

16. All debt is calculated the same way

When you think about debts and your credit score, keep in mind that different debts will factor differently into your score.

If you have a credit card, that’s a revolving debt. You can use it and pay it and use it again.

But if you have a mortgage or auto loan, that’s an installment loan. You borrow a certain amount, pay it off, and then you’re finished.

The balance on revolving debt is going to factor into your credit score more than the balance on your installment loans. This goes back to your credit utilization ratio. Lenders want to see the lowest possible ratio because a higher one (such as a maxed out credit card) makes it seem like you’re stretching too far, financially-speaking.

You don’t have to worry about installment loan balances the same way. As long as you’re staying current on your payments, these loans won’t hurt your score.

17. A missed payment is no big deal

Everyone misses a payment at least once in their life, or so it seems. And while it may not seem like a big deal, it certainly can be.

Late payments can be reported to the credit reporting bureaus in as few as 30 days. How late a payment is can factor differently on your score, but the late payment can stay on your score for as long as seven years.

18. Pay someone to fix your credit

If you’re feeling the heat of bad credit, it can be incredibly tempting to fall for a promise that someone can “fix” your credit for a fee. Well, the truth is, they can’t.

There’s only one way to fix your credit – and that’s to do it yourself. No matter what someone wants to sell you, they can’t create an overnight solution to your credit score woes. If you want to improve your score, you’re going to need to work at it.

Pay off accounts that have charged off. Work to pay off current debt. And don’t make late payments. These are the actions that will lead to a better score – and no one can shortcut that for you.

19. Your score never recovers from bankruptcy

Sometimes things can be so difficult financially that bankruptcy is the only way out. But it can be a scary decision considering the damage bankruptcy inflicts on your credit score for many years.

That said, the damage isn’t irreparable. Yes, it will take seven to 10 years to get a bankruptcy filing it off of your report. But when it’s off, you can start fresh again.

20. You have no control over your credit score

And finally, the worst credit myth of all: you have no control over your credit score.

While you can’t erase past financial missteps right away, it’s in your power to pave the path to a better future. You do have control over your credit score.

Establish good credit habits today so you can start reaping the benefits as soon as possible. If you decide right now that you’re going to practice responsible credit behaviors, no matter what has or hasn’t happened in the past, you can make sure you earn a good credit score. It’s entirely up to you.

Want to fix your credit? Do this.

If you want to fix your credit, start paying down your debt and make sure you never miss a payment. Review your credit report every year to check for errors. And don’t be scared of using credit – just avoid falling into debt. Do these things and you’ll be on your way to a great score.

Even if you’ve never had a good credit score before, you can do it. It just takes time and persistence. You’ll get there.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderAPR RangeLoan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal Loans: Fixed rates from 6.990% APR to 14.865% APR (with AutoPay). Variable rates from 6.255% APR to 12.555% APR (with AutoPay). SoFi rate ranges are current as of September 1, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.255% APR assumes current index rate derived from the 1-month LIBOR of 2.08% plus 4.425% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

    To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.See Consumer Licenses.
  2. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  3. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  4. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 4.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 4.99% APR loan, a borrower will need excellent credit on a loan of $15,000 with a term of 24 months, and qualify for at least two of the following discounts: (1) add a co-borrower who has sufficient income; (2) use at least fifty percent of the loan proceeds to directly pay off existing debt; or (3) show proof of having at least forty-thousand dollars in retirement savings – contact FreedomPlus for further details.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

5 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $25,000, at rates ranging from a low of 15.49% APR to a high of 34.49% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

6 Important Disclosures for LendingClub.

LendingClub Disclosures

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.


7 Important Disclosures for Earnest.

Earnest Disclosures

  1. Earnest does not lend in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.

8 Important Disclosures for Avant.

Avant Disclosures

* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33


* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

7.73% – 29.99%$1,000 - $50,000Visit Upstart
6.26% – 14.87%1$5,000 - $100,000Visit SoFi
6.99% – 35.97%*$1,000 - $50,000Visit Upgrade
8.00% – 25.00%2$5,000 - $35,000Visit Payoff
4.99% – 29.99%3$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%4$5,000 - $50,000Visit Citizens
15.49% – 34.49%5$2,000 - $25,000Visit LendingPoint
6.16% – 35.89%6$1,000 - $40,000Visit LendingClub
6.99% – 18.24%7$5,000 - $75,000Visit Earnest
9.95% – 35.99%8$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.