Your credit score affects loans, housing, and even job opportunities. But common myths can hold you back. Here’s what you need to know:

Checking your credit score doesn’t lower it - soft inquiries are harmless.
Closing old credit cards can hurt your score by raising utilization and shortening credit history.
You have multiple credit scores, not just one, depending on the scoring model and lender.
Carrying a balance doesn’t help your score - it increases credit utilization.
Income doesn’t directly impact your score - credit habits matter more.
Paying off collections doesn’t instantly boost your score, but it helps over time.
Credit repair companies can’t fix your score quickly - you can dispute errors yourself.
Young people can have good credit by starting early and practicing good habits.

AI tools now help monitor credit, track trends, and offer personalized advice. Focus on paying bills on time, keeping utilization low, and regularly checking your reports to improve your credit health.

Top Credit Myths Debunked: Improve Your Credit Scores with Expert Advice

1. Myth: Checking Your Credit Score Lowers It

Many people mistakenly believe that checking their credit score will harm it. This confusion comes from not knowing the difference between two types of credit checks: soft inquiries and hard inquiries.

Soft inquiries, like when you check your own score, have no impact on your credit. On the other hand, hard inquiries, such as applying for a loan, can temporarily lower your score. In fact, analyzing 2 million credit reports reveals that people who regularly check their scores tend to:

Spot and dispute errors more quickly
Make smarter financial decisions
Keep their credit scores higher

"Checking your own credit report or scores will not affect your credit scores. In fact, it can help you better understand the impact of your credit decisions." ^[2]

This statement from Julie Kuzmic, Senior Compliance Officer and Consumer Advocate at Equifax Canada, supports the findings. Regular monitors of their credit reports, according to the same analysis, maintain scores that are 12% higher on average.

Want to stay ahead? Use automated alerts from credit bureaus to track changes to your credit without any risk.

2. Myth: Closing Old Credit Cards Boosts Your Score

Closing old credit cards might sound like a smart move, but it can actually hurt your credit score in two important ways. First, it raises your credit utilization ratio by lowering your available credit while your balances stay the same. Second, it reduces your credit history length, which makes up 15% of your score and highlights your ability to manage credit over time.

Keeping older accounts open plays a key role in maintaining a strong credit profile. Tools powered by AI can help you monitor your credit metrics and suggest strategies to manage your accounts effectively.

Instead of canceling old cards, try these practical options:

Use them for small, recurring expenses and set up automated payments.
Ask for fee waivers if the card has an annual cost.
Store unused cards securely rather than closing them.

Of course, there are exceptions - like cards with steep annual fees that don't offer enough perks to justify the cost. Before making any decision, weigh the potential impact carefully. AI-driven credit monitoring tools can provide insights into how closing an account might affect your score.

While the risks of closing old cards are clear, there’s another myth to tackle: the misconception about how many credit scores you actually have.

3. Myth: You Have Only One Credit Score

Your credit score isn’t a single, fixed number. Instead, it’s calculated differently depending on the scoring model and purpose. This means you actually have multiple credit scores.

The three major credit bureaus - Experian, Equifax, and TransUnion - each maintain their own reports, which can result in variations across scoring models. In some cases, scores can differ by more than 100 points ^[1].

Here’s how scores are prioritized based on the type of loan:

Lending Type	What Matters Most
Auto Loans	Payment reliability
Mortgages	Long-term financial stability
Credit Cards	Short-term risk

Different lenders focus on specific aspects of your credit history. For example, an auto lender might care more about whether you’ve made car payments on time, while a mortgage lender will look closely at your long-term financial habits.

As credit expert John Ulzheimer puts it:

"You have many credit reports, although we tend to focus on those housed by the 'Big 3' credit bureaus, Experian, Equifax, and TransUnion." ^[1]

The reason for these variations? Each scoring model weighs factors like payment history, credit utilization, and account age differently. To stay on top of your credit across the board:

Regularly check reports from all three major bureaus.
Practice good credit habits, like paying bills on time and keeping balances low.
Be aware that lenders may use different scores for different purposes.
Ask which scoring model is being used when applying for loans.

Knowing that you have multiple credit scores allows you to better prepare for loan applications and make smarter financial choices. Let’s move on to another common myth - whether carrying a balance boosts your credit score.

4. Myth: Keeping a Balance Improves Your Credit Score

Some believe that carrying a balance on your credit card helps boost your credit score. This idea often leads to paying extra interest and can even harm your score. Rod Griffin, Senior Director of Consumer Education and Advocacy at Experian, clears this up:

"Carrying a balance does not improve credit scores. Instead, it can harm credit health by increasing credit utilization ratios." ^[3]

Your credit utilization - the percentage of your available credit that you're using - plays a big role in your credit score. Here's a quick look at how different utilization levels impact your score:

Credit Utilization	Effect on Credit Score	What You Should Do
0-10%	Most positive	Aim to stay in this range
11-30%	Generally positive	Still acceptable
Above 50%	Strong negative impact	Act quickly to reduce utilization

Modern scoring models now look at your utilization trends over time, not just a single moment. Tools powered by AI can help you track these trends and offer advice to keep your utilization in check.

Tips to Maintain a Healthy Credit Score

Pay off your full balance by the due date to avoid interest.
Keep your utilization below 30% on all cards.
Regularly monitor your credit utilization.
If needed, request a credit limit increase to lower your utilization ratio.

Using your credit cards responsibly - charging what you can afford and paying it off in full - can help you build a strong credit score without unnecessary costs.

Now that we've debunked this myth, let's move on to another misunderstanding about income and credit scores.

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5. Myth: Your Income Directly Impacts Your Credit Score

Many people assume that a higher income automatically leads to a better credit score. However, credit scoring models like FICO and VantageScore don’t include your salary when calculating your creditworthiness.

Here’s what actually goes into a FICO credit score:

Credit Factor	Weight	What It Measures
Payment History	35%	Whether you pay bills on time or have defaults
Credit Utilization	30%	How much of your available credit you’re using
Length of Credit History	15%	How long your credit accounts have been active
Credit Mix	10%	Variety of credit types (e.g., loans, cards)
New Credit	10%	Recent credit inquiries and applications

While your income isn’t part of this equation, it can still play an indirect role. For example, having a stable income might make it easier to pay bills on time or keep your credit utilization low - both of which are key to maintaining a strong score. On the other hand, lenders often evaluate your income separately when deciding credit limits or loan approvals, but that’s outside the scope of your actual credit score.

If you want to build or maintain a solid credit score, focus on these habits:

Pay bills on time - this is the most important factor.
Keep your credit utilization low, ideally below 30%.
Check your credit reports regularly to spot and fix any errors.

Ultimately, it’s not about how much you earn - it’s about how you manage your credit. Whether your salary is $40,000 or $200,000, good credit habits are what truly count.

Now that we’ve cleared up this myth, let’s tackle the next one: does paying off collections improve your score? Stay tuned.

6. Myth: Paying Off a Collection Instantly Boosts Your Score

A common belief is that paying off a collection account will immediately improve your credit score. But the reality is more complex - credit scoring models handle collection accounts differently.

Rod Griffin, Senior Director of Consumer Education and Advocacy at Experian, explains that newer scoring models like FICO® 9 and VantageScore® 4.0 disregard paid collections. However, older models such as FICO® 8 still factor in both paid and unpaid collections over $100. This means the impact of paying off a collection depends on which scoring model is being used.

Even when paid, collection accounts remain on your credit report for up to seven years. Unpaid collections can drop your score by 50 to 200 points, though the impact lessens over time. Since payment history makes up 35-41% of your credit score (depending on the model), paying off a collection does signal improvement, but it’s not an instant fix.

Paying off a collection changes its status to "Paid Collection", which newer scoring models tend to overlook. While this might not result in a big score boost right away, it can improve your financial credibility in the long run. And with lenders expected to adopt newer scoring models by 2025, paid collections will carry less weight in future credit evaluations.

To manage collection accounts effectively, AI tools can help you track them, confirm accuracy, and develop repayment strategies. The Consumer Financial Protection Bureau (CFPB) also suggests these steps: verify the debt, negotiate repayment terms, get agreements in writing, and ensure the agency updates your credit report.

While understanding collections is essential, be cautious of credit repair solutions that promise more than they can deliver.

7. Myth: All Credit Repair Companies Can Quickly Fix Your Score

Promises of a fast credit score boost can be tempting, but they’re often misleading. The CFPB highlights that many credit repair companies overstate their ability to improve scores in a short time. Julie Kuzmic from Equifax Canada points out:

"Credit repair companies can't do anything that you can't do yourself, and they often charge you for it." ^[2]

While legitimate services may help identify mistakes and file disputes, they can’t erase accurate negative information or guarantee quick results. Research from the National Foundation for Credit Counseling reveals that 60% of people using credit repair services don’t see meaningful improvements in their scores ^[1].

The Credit Repair Organizations Act (CROA) protects consumers by banning upfront fees, false claims, and unclear contracts. Plus, modern AI-driven credit monitoring tools can help you spot and dispute errors yourself - often eliminating the need for paid services.

Stick to reliable methods like reviewing your credit reports, paying bills on time, and keeping your credit utilization low. If you decide to use a credit repair service, check their credentials and know exactly what they’re offering. While these companies can't work miracles, many younger individuals misunderstand how to build good credit over time.

8. Myth: Young People Cannot Have Good Credit Scores

Credit scores are based on financial habits, not how old you are. John Ulzheimer, a credit expert, emphasizes that nearly half of your score is tied to your payment history. Paying bills on time is crucial.

"Credit scoring systems certainly consider whether or not you pay your bills on time. In FICO and VantageScore's credit scoring platforms, your payment history accounts for nearly half of the points in your credit score..." ^[1]

FICO scores weigh payment history at 35% and credit utilization at 30%. These are areas where young people can excel, proving that age isn't a factor. Unfortunately, this myth often stops young people from starting their credit journey, but the reality is that good habits outweigh age.

Young people can begin by using student credit cards or becoming authorized users on a parent's account. Starting early and sticking to responsible practices can lead to strong credit scores, even within the first year of credit activity.

Conclusion

AI is reshaping credit scoring, making it easier to make informed financial decisions. By addressing common myths, we've shown how accurate information and regular credit monitoring are key to understanding and improving your credit profile.

These tools simplify credit management by offering clear insights into multiple scoring models, giving you a well-rounded view of your credit health. They also help you understand how your actions impact your creditworthiness, cutting through confusion with reliable, data-driven clarity.

AI-powered tools bring real-time tracking and tailored recommendations to the table, helping you take specific steps to maintain and improve your credit.

To get the most out of AI in credit management:

Use AI tools wisely: Take advantage of their monitoring features and personalized suggestions.
Stay educated: Keep up with trusted sources for updates on credit scoring systems.
Be consistent: Apply the insights you gain to maintain good credit habits.

While AI tools offer valuable support, they’re most effective when paired with responsible financial practices and regular reviews of your credit profile. By combining these tools with smart habits, you can take control of your financial future.

8 Credit Score Myths Debunked by AI Experts

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