Credit Score Myths That Cost You Better Card Offers
Most people carry around credit score beliefs that are flat-out wrong. And these misconceptions are more than harmless-they actively prevent consumers from qualifying for better credit card offers, lower interest rates, and premium rewards programs.
A 2023 Consumer Financial Protection Bureau study found that 68% of Americans hold at least one significant misconception about how credit scores work. That’s a problem when the average difference between “good” and “excellent” credit can mean thousands of dollars in interest savings over a lifetime.
Time to separate fact from fiction.
Myth #1: Checking Your Own Credit Score Hurts It
This one refuses to die. The belief that looking at your own credit report damages your score keeps millions of consumers in the dark about their actual credit standing.
Here’s the reality: when you check your own credit through a bank, credit monitoring service, or directly from the bureaus, it generates a “soft inquiry. " Soft inquiries have zero impact on FICO or VantageScore calculations. None.
“Hard inquiries” are different. These occur when a lender pulls your credit during an application. A single hard inquiry typically drops a score by 5-10 points and stays on reports for two years, though its scoring impact fades after 12 months.
The Federal Trade Commission recommends checking credit reports at least annually. Consumers who monitor their credit regularly catch errors faster-and credit report errors affect roughly 25% of Americans, according to FTC data.
The real cost: People avoiding credit checks often miss errors dragging down their scores. A 40-point drop from an unreported error could mean rejection for a premium travel card or a 3% higher APR on a balance transfer offer.
Myth #2: Closing Old Credit Cards Improves Your Score
Logic seems to support this one. Fewer accounts should mean less risk, right?
Credit scoring doesn’t work that way.
Closing a credit card typically damages scores through two mechanisms:
Credit utilization ratio: This factor comprises roughly 30% of a FICO score. The calculation divides total credit used by total credit available. Close a $10,000 limit card while carrying $5,000 in balances elsewhere, and utilization jumps significantly.
Example: A consumer with $25,000 in total available credit using $5,000 has 20% utilization. Close one card dropping available credit to $15,000, and that same $5,000 balance now represents 33% utilization-firmly in the “needs improvement” zone.
Average age of accounts: Length of credit history counts for approximately 15% of FICO scores. Closing the oldest card on a credit report can dramatically shorten average account age.
A Consumer Finance study from 2022 tracked 1,200 consumers who closed credit cards. Average score drops ranged from 15-45 points within 60 days of closure, with the largest impacts hitting those who closed older accounts.
When closing makes sense: Cards with high annual fees and no ongoing value, cards tempting overspending, or cards from lenders with poor customer service may warrant closure despite scoring impacts. The key is understanding the trade-off rather than assuming closure helps.
Myth #3: You Need to Carry a Balance to Build Credit
This misconception costs consumers billions in unnecessary interest payments annually.
The myth persists partly because it sounds plausible. Surely lenders want to see borrowers actually, well, borrowing?
Nope. FICO scoring algorithms don’t distinguish between consumers who pay in full versus those carrying balances. What matters is demonstrating responsible use: making payments on time and keeping utilization reasonable.
Paying statement balances in full every month builds credit exactly as effectively as carrying debt-without the 20%+ APR charges most credit cards assess.
A NerdWallet analysis calculated that the average American household carrying credit card debt pays $1,380 annually in interest. That’s money thrown away chasing a credit-building strategy that doesn’t actually work.
What actually builds credit:
- Consistent on-time payments (35% of FICO score)
- Low utilization relative to limits (30% of score)
- Length of credit history (15% of score)
- Credit mix including different account types (10% of score)
- Limited new credit applications (10% of score)
None of these factors reward carrying balances.
Myth #4: Income Directly Affects Credit Scores
Credit applications ask for income. Card issuers clearly care about earnings. So income must factor into credit scores, right?
It doesn’t. Income appears nowhere in FICO or VantageScore calculations.
Credit scores measure past credit behavior exclusively. A consumer earning $40,000 annually with perfect payment history and low utilization will outscore someone earning $400,000 with missed payments and maxed-out cards.
Now, income absolutely matters for card approvals-just through a different mechanism. Issuers evaluate income during underwriting to assess ability to repay. High-limit premium cards typically require demonstrated income to support the credit line.
But that’s the issuer’s decision, not the credit score’s job.
The confusion costs people: Consumers assuming low income automatically means low scores may not apply for cards they’d qualify for. Meanwhile, high earners with credit problems assume their income compensates for payment issues. It doesn’t.
Myth #5: All Credit Scores Are the Same
Consumers often check one score and assume they know where they stand everywhere. Unfortunately, the credit scoring area is messier than that.
FICO alone has dozens of scoring models, including industry-specific versions for auto loans, credit cards, and mortgages. A consumer might have a 720 FICO Score 8 but a 695 FICO Auto Score 9.
VantageScore uses different algorithms entirely. Scores can vary 20-40 points between FICO and VantageScore even when based on identical credit report data.
And the three major bureaus-Equifax, Experian, and TransUnion-don’t always have matching information. A late payment reported to one bureau but not others creates three different credit profiles.
A 2021 Consumer Reports investigation found that 34% of consumers had material differences in information across the three bureaus.
Practical implications: The free score from a banking app might show 750, but a mortgage lender pulling a different FICO version from a different bureau might see 715. Understanding score variability prevents surprise rejections and helps set realistic expectations.
Myth #6: Paying Off Collections Removes Them From Reports
Paying a collection account is the right thing to do. But it won’t erase the collection from credit reports.
Collection accounts remain on credit reports for seven years from the original delinquency date-regardless of payment status. Paying changes the status to “paid collection” rather than removing the entry entirely.
Recent FICO and VantageScore models do treat paid collections more favorably than unpaid ones. And some newer scoring versions ignore paid collections under certain thresholds. But the traditional FICO Score 8, still widely used by card issuers, treats paid and unpaid collections similarly for scoring purposes.
Better strategies:
- Negotiate “pay for delete” agreements where collectors remove listings upon payment
- Dispute inaccurate collection entries directly with bureaus
- Request goodwill adjustments from original creditors
- Wait for collections to age off (negative impact diminishes after 24 months)
What This Means for Card Seekers
Understanding credit scoring reality unlocks better card opportunities. Someone operating under these myths might:
- Avoid checking their credit, missing correctable errors
- Close old accounts before applying, tanking their utilization ratio
- Carry unnecessary balances, wasting money and not helping scores
- Assume income limitations when scores actually qualify them for premium products
- Check one score and misjudge their approval odds
- Pay collections expecting immediate score recovery that won’t come
The credit card market includes products designed for every credit tier. Excellent scores (740+) access premium rewards cards with substantial sign-up bonuses. Good scores (670-739) qualify for solid cash-back and travel options. Fair scores (580-669) can still find secured cards and credit-builder products that improve positioning over time.
But accessing the right tier requires accurate self-knowledge. Myths create blind spots - and blind spots cost money.
Credit scoring isn’t intuitive-the system wasn’t designed with consumer understanding in mind. But the rules are knowable. Learning them creates genuine competitive advantage in the credit card marketplace.
