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Credit scores control more than just loan approvals—they affect jobs, insurance rates, and even where people can live. Yet, the average consumer is still navigating a maze of misinformation. Much of that confusion is fueled by persistent myths, many of which are quietly endorsed—or at least not corrected—by big banks and financial institutions.
These myths benefit lenders, not consumers, by encouraging behaviors that can cost people more in interest, fees, and missed opportunities. It’s time to shed light on the myths that continue to circulate and why they need to be put to rest.
1. Carrying a Balance Improves Your Credit Score
The idea that keeping a small balance on credit cards boosts your score is completely false. Credit utilization matters, but interest charges on a carried balance do more harm than good. Big banks make billions from interest, so this myth conveniently serves their bottom line. Paying the balance in full each month is the smarter move for both your score and your wallet. FICO and VantageScore models reward low balances, not ongoing debt.
2. Checking Your Credit Score Hurts It
Soft inquiries, like checking your own credit, have zero impact on your score. This myth deters people from tracking their credit health, which benefits lenders more than borrowers. Only hard inquiries—like applying for a loan or credit card—can cause a minor, temporary dip. Knowing your score is essential to protecting it, and there’s no penalty for staying informed. Banks benefit when consumers avoid monitoring their scores and miss red flags.
3. Closing Credit Cards Helps Your Credit
Banks often suggest closing old or unused credit cards to “clean up” a credit report. But this can actually lower your credit score by reducing your average account age and increasing your utilization ratio. Older accounts boost your credit history, which is a key factor in most scoring models. Unless the card has high fees or risk of misuse, keeping it open is usually the better strategy. This myth steers people into actions that weaken their financial standing.
4. You Only Have One Credit Score
In reality, everyone has dozens of credit scores depending on the scoring model and the data used. Lenders use different models for different types of credit—mortgages, auto loans, and credit cards all use separate scores. Banks rarely clarify this, creating the illusion of a single “true” number. This lack of transparency makes it easier for lenders to justify higher rates or deny credit based on versions consumers aren’t even aware of. The myth simplifies a complex system in ways that help banks, not borrowers.
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5. Income Directly Affects Your Credit Score
Credit scores don’t include income as a factor. A high salary may improve loan approval odds, but it does not directly influence your credit rating. This myth persists because it sounds logical, and banks often use income in their broader lending decisions. But mixing up lending criteria with scoring formulas leaves consumers misinformed about how to build or maintain credit. Banks benefit when people wrongly assume wealth equals creditworthiness.
6. You Must Go Into Debt to Build Credit
Some believe that taking on debt is the only way to establish a credit history. But using credit responsibly—without staying in debt—is enough to build a strong score. Opening a secured credit card or becoming an authorized user can start the process without revolving debt. Banks often frame debt as a necessity, but it’s consistent on-time payments that do the real work. This myth pressures people into unnecessary borrowing that profits lenders.
7. Paying Late Once Isn’t a Big Deal
Even a single late payment can damage a credit score for up to seven years. Big banks may downplay the impact to keep late-fee revenue flowing. In truth, payment history is the most important part of most credit scoring models. Consumers who understand this are more likely to prioritize their payments, which can reduce banks’ late payment income. The myth minimizes the seriousness of missed payments while maximizing bank profits.
8. Debit Cards Build Credit Just Like Credit Cards
Banks often fail to clarify the difference between credit and debit in terms of credit-building. Debit card activity is not reported to credit bureaus and does nothing to improve a credit score. This misunderstanding leads many to believe they’re building credit when they’re not. Banks may benefit from this confusion because it keeps consumers dependent on more costly credit-building tools. Clear education on this point is often missing from financial institutions.
9. All Debt Is Equal in the Eyes of Credit Scoring
Credit scoring models distinguish between types of debt, favoring installment loans like auto or student loans over revolving debt like credit cards. Revolving debt tends to have a higher impact on utilization ratios, which directly affect your score. Banks often lump all debt together in public messaging, oversimplifying how scoring really works. This confusion may cause consumers to carry costly credit card balances unnecessarily. Understanding the difference can lead to smarter debt management and lower costs.
10. Paying Off a Collection Account Will Erase It From Your Report
While paying off a collection account is better than leaving it unpaid, it doesn’t remove it from a credit report. The account can stay visible for up to seven years, affecting future lending decisions. Some banks and collectors imply that full payment wipes the slate clean, which isn’t entirely accurate. This myth gives consumers false hope and can lead to frustration when their score doesn’t bounce back immediately. Honest guidance about how collections impact credit is often lacking.
It’s Time to Rewrite the Credit Rulebook
Credit myths don’t just cause confusion—they cost consumers real money and opportunity. Big banks, whether through silence or subtle suggestion, often allow these outdated ideas to persist. Dispelling these myths empowers people to take control of their financial futures with accurate information. Understanding how credit really works is one of the most effective ways to protect long-term financial health.
Have you heard any of these myths lately? Share your thoughts or drop a comment below—what credit advice have you been told that didn’t hold up?
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